4 Min Read
* 2012 revenue rises 15.5 pct to 13.56 bln eur
* Revenue forecast to rise around 5 pct in 2013
* CEO says interested in Avio space propulsion unit
* Shares fall 2.5 pct, revenue forecast disappoints
By James Regan and Cyril Altmeyer
PARIS, Feb 21 (Reuters) - Strong demand for aircraft engines, parts and lucrative aftermarket maintenance contracts pushed full-year operating profit at French aerospace group Safran up 24 percent.
Safran, part of the CFM engine joint venture with General Electric, is benefiting from record aircraft production as Airbus and Boeing tap into transport growth in emerging markets and demand from Western airlines for fuel savings.
The widely watched civil aftermarket, where engine-makers make most of their margins, is picking up as many CFM engines enter the workshop for their first major overhaul.
Safran posted full-year recurring operating income of 1.47 billion euros ($1.97 billion), in line with the average forecast in a Thomson Reuters I/B/E/S analyst poll, on revenue of 13.56 billion, up 15.5 percent year-on-year.
Safran also said on Thursday it was interested in buying Avio's space propulsion business - maker of boosters for the Ariane 5 rocket - after losing out to General Electric in a race to buy the Italian aerospace supplier late last year.
Safran forecast 2013 revenue growth would slow to around 5 percent, with recurring operating income up by a mid-teen percentage.
"Safran reported a solid finish to 2012, bolstered by strong civil aftermarket performance," Barclays analysts wrote, adding that the group's overall outlook could disappoint investors, but forecasts for the civil aftermarket were higher than expected.
Barclays said the market was expecting around 9 percent sales growth for 2013. Safran shares were down 2.5 percent by 0846 GMT in a 1.5 percent weaker French market. The stock had risen about 10 percent in the past three months.
Civil aftermarket sales grew 9.4 percent in dollar terms last year, driven by first overhauls of recent CFM56 engines.
Aerospace propulsion revenue including Safran's share of CFM, which powers Boeing 737s and some Airbus jets, rose 14.6 percent last year, with operating income up 21 percent to 1.1 billion euros.
The improvement followed "healthy activity in civil aftermarket and helicopter engines maintenance", as well as higher volume on all military and commercial engines.
Safran Chief Executive Jean-Paul Herteman said Boeing had asked Safran to continue delivering cabling, landing gear and other parts for its 787 Dreamliner at the same rate, despite problems related to the aircraft's use of lithium-ion batteries.
"We are particularly confident we are on track for further solid earnings growth in 2013 and in future years," he said.
Safran said its order backlog rose 5.5 billion euros to 48.5 billion last year and free cash flow, at 38 percent of recurring operating income, would reach about 40 percent this year.
Safran sought last year to buy Turin, northern Italy-based Avio, but lost out when General Electric agreed to buy its aviation unit for $4.3 billion from private equity fund Cinven and state-controlled defence group Finmeccanica.
Avio makes components for the GE engine for the Boeing 787 and ranks among Italy's industrial jewels as one of the most technologically advanced companies in its field.
General Electric did not buy Avio's space unit, which the Italian government considers strategic and was expected to make sales of between 280 million euros and 285 million in 2012.
Herteman said Safran was still interested in the space propulsion business.
"The Avio space business could be on the market in the short-term," he said. "We are a partner with Avio in space. There are some strong synergies and complementarities. It is too early to say more on that."
The two are "not yet" in exploratory discussions, he added.