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Safran hikes forecasts after strong quarter for jet engine services

Safran, the French aerospace company, raised its full-year revenue forecasts after reporting higher than expected third-quarter revenues led by its core Jet Engine division.

The company, who co-produces LEAP engines with GE Aerospace via their CFM venture said that it had "strongly caught up" on late deliveries in the third quarter, shipping more than any other quarter.

Airbus and Boeing have delayed their jet deliveries and caused congestion in maintenance centres, which has led to a strong demand from engine manufacturers for spare parts.

In the engine industry, there is a tug-of-war between aircraft manufacturers and airlines that need spare parts to alleviate shortages.

The CEO of Andries Aerospace, Olivier Andries, said that demand for parts and services for civil jet engines is still strong.

Safran reported that its revenue for the third quarter rose by 18.3%, to 7,85 billion euros (9.15 billion dollars). The propulsion revenue grew by 25.6% and the aftermarket or services grew by 21.1%.

According to a consensus compiled by a company, analysts expected quarterly revenues in the range of 7.59 billion euro.

Safran announced that it would be increasing its revenue growth projection for the entire year from "low teens" to between 11%-13%. In the French version of Safran's earnings announcement, it was clarified that its previous forecast stood at 10% to 13%.

The forecasted operating income was also increased to between 5.1 and 5.2 billion euro from the previous range of 5 to 5.1. Its free cash flow forecast ranged from 3.4 to 3.66 billion euros.

Tariffs are now included in all targets.

'CATCH-UP EFFECT'

Safran has followed GE Aerospace and raised its growth forecasts of LEAP deliveries in 2025 to over 20%, from a range between 15% to 20%.

Andries stated that LEAP engine deliveries in the fourth quarter will be similar to those seen in the third, when CFM shipped a total of 511 engines. This was a 40% increase from the same time last year.

Andries responded that CFM is ready to make adjustments to allocations if necessary.

He told reporters, "But it's not a significant amount, just a few engines. And when we do this, there is a catching-up effect."

Andries stated that CFM and Airbus were discussing future needs, but he did not state whether CFM had committed to Airbus' plans to increase narrow-body production to 75 jets per month by 2027. Nevertheless, he noted that the Airbus goal did not cover 2027 as a whole. $1 = 0.8575 euro (Reporting and editing by Jamie Freed, Jane Merrill)

(source: Reuters)