Safran profits edge up; says new Leap jet-engine release remains on track
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French jet engine maker Safran said the production of its new Leap engine was “on track” as it reported a 5.4 per cent rise in 2016 core operating profit and a stable 2017 income.
Safran, in a joint venture with GE, produces the world’s bestselling jet engine, the CFM56, which is exclusively used on Boeing’s short-haul workhorse, the 737, as well as some of Airbus’s equivalent, the A320.
The company now faces its biggest ever industrial challenge, transitioning to producing the next-generation Leap engine.
Safran had 30 years to raise output the CFM56 to 1,700 units in 2016 — an all-time high. It now has just four years to reach 2,000 Leap engines per year. This is by far the biggest concern for investors.
But on Friday the company said that the the transition was “on track” and the entry into service had so far been “smooth”.
Philippe Petitcolin, the Safran chief executive, said:
Operationally, we are executing well on the entry into service and production ramp-up of the LEAP. At the same time, our production of CFM56 has never been higher with 1,693 engines delivered in the year.
The company, which last month announced an agreed deal to buy French rival Zodiac Aerospace, said the 2016 results were driven mainly by improvements in its aircraft equipment division.
Total adjusted revenue grew 1.6 per cent to €15.8 billion euros in 2016.
The Safran management has been in a war of words with The Children’s Investment Fund, run by Sir Chris Hohn, after he launched a campaign to block the Zodiac deal, saying it had “no strategic rationale” and demanding cash be returned to shareholders instead.
Safran’s management struck back on Thursday, claiming TCI was making “baseless” claims, and it cast doubt on the fund manager’s understanding of both French corporate governance laws and the aerospace industry.
The Zodiac deal will create the world’s third-largest aerospace supplier by revenue after UTC and General Electric.
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