UPDATE 2-France's Zodiac bullish on aerospace growth

Tue Nov 22, 2011 8:31am EST

* FY op profit up 60 pct to 386 mln eur vs consensus 371 mln

* Operating margin 14 pct, dividend up 20 pct

* Sees Q1 organic sales up 20 pct

* Confident in aero supply chain, 787 production plans

* Shares up 4.5 percent

By Tim Hepher and Cyril Altmeyer

PARIS, Nov 22 (Reuters) - France's Zodiac Aerospace SA offered crisis-weary investors respite with a prediction that emerging markets would carry the high-tech industry through the debt problems and economic uncertainties piling up in the West.

The family-controlled company, which supplies plumbing, power and parts for Airbus and Boeing Co jetliners, said on Tuesday the supply chain was robust enough to keep up with record production needed to meet demand in the Middle East and Asia.

"We hear worries about the international economy, but when we look at our (fiscal) first quarter which closes next week, we are still up 20 percent in like-for-like revenues, just like the previous quarter," Chairman and Chief Executive Olivier Zarrouati said.

"When we listen to our clients and to Airbus, and to a lesser extent Boeing, their main concern is whether the supply chain can support the increases in production rather than anything else," he told analysts.

Zarrouati added that the increase in production would not be costly for the company in terms of industrial investment and that the supply chain would be able to keep up with Airbus and Boeing as they increase production.

Investors agreed, pushing up Zodiac shares as much as 8 percent after the Paris-based company reported higher-than-expected 2010/11 results and promised further growth.

The role of Asia in lifting the aerospace industry out of the malaise experienced by much of the rest of the economy was highlighted last week when U.S. President Barack Obama oversaw the provisional sale of 230 Boeing jets to Indonesia's Lion Air.

The growing jetliner fleet also promises sales of spares and Zodiac said it would beat its target of boosting revenue 40 percent over three years. It hiked its dividend 20 percent.

At 1200 GMT, Zodiac shares were up 4.5 percent at 55.2 euros. They have fallen just 6 percent this year compared with a 23 percent drop in the broad French SBF120 index.

RAMPING UP PRODUCTION

Zarrouati, whose company repelled a takeover approach from state-controlled Safran SA a year ago, said he did not believe "for a second" that emerging markets would stop growing.

And despite industry concerns in France that some of the country's smallest suppliers could be hit by a squeeze on French bank lending due to the euro zone debt crisis, he said surveys of suppliers had shown nothing to be too worried about.

Airbus and Boeing are ramping up production of their best-selling narrow-body models to record levels to cope with the backlog in demand from Asia and the Middle East.

Europe's Airbus has, however, expressed concerns about the fragility of a network of hundreds of suppliers and appealed to French banks to keep lending to small companies that lack access to alternative sources of finance.

Production of Boeing's newest model, the 787 Dreamliner, was hit by recent problems in the planemaker's global supply chain.

Zarrouati expressed confidence in Boeing's ability to increase output of the carbon-fibre plane to 10 planes a month by the end of 2013 from 2.5 a month now, a target widely seen as challenging after three years of delays.

He said Zodiac was ready to support the goal but told Reuters the company's revenue planning assumed a lower total than Boeing's projections, for the sake of prudence.

Zodiac sells $2.5 million in items from escape slides to windshield wipers for each Dreamliner. That excludes seats, which airlines buy directly from the supplier. Zodiac made the seats for the first 787 operated by All Nippon Airways.

For the 12 months to Aug. 31, Zodiac reported a 60 percent rise in operating profit to 386 million euros and an operating margin of 14 percent, up from 11.2 percent in 2009/10. Net profit grew by the same amount to 238 million euros.

Analysts had on average expected full-year operating profit of 371 million euros, equating to an operating margin of 13.5 percent, and net profit of 237 million. Zodiac had targeted an operating margin of more than 13 percent.

Zodiac had already reported a 28 percent rise in 2010/11 sales to 2.75 billion euros, partly fuelled by acquisitions, with revenue up 17.3 percent on a like-for-like basis.

Zodiac bought German cabin interiors company Sell in 2010.