* Safran reiterates P+L targets, issues caveat on cash
* Safran sees 1,500 CFM engine deliveries this year and next
* French company reafffirms interest in Avio Space
(Adds executive quotes, details)
By Gwénaëlle Barzic and Tim Hepher
PARIS, Oct 24 Stronger than expected sales of
engine services pushed Safran revenues up 9.7 percent
in the third quarter as the French aerospace group reaffirmed
targets for the year, while sounding a more cautious note on
currencies and cash.
The maker of the world's most-sold civil jet engine, the
CFM56 which it co-produces with General Electric, said
suppliers were managing to keep up with production increases by
planemakers as airlines in emerging markets snap up new planes.
Safran's civil aftermarket, driven mainly by maintenance for
the most recent version of the engine that powers popular
medium-haul jets made by Boeing and Airbus, rose 45.2 percent in
the third quarter after a particularly lacklustre year-ago
Shares in the French company rose 1.43 percent.
Chief Executive Jean-Paul Hertemann said the aftermarket
growth put Safran in a position to meet its goals for the year,
despite a tougher comparison in the fourth quarter.
"Today's results are particularly strong and ahead of our
expectations," said RBC Capital Markets analysts Rob Stallard in
a note, adding Safran had outstripped aftermarket growth of 17
percent at its main U.S. competitor Pratt & Whitney.
Safran expects mid-to-high single-digit percentage growth in
revenue and around 20 percent growth in recurring operating
profit for 2013 -- targets that it repeated on Wednesday.
But the company, which is also a contractor for defence and
security equipment, said its cashflow targets could be affected
by uncertainty over the timing of government advance payments
that traditionally fall in the last quarter.
The company aims to turn 40 percent of its core operating
earnings into cash.
It also shed further light on recent currency turmoil driven
partly by the U.S. budget crisis, saying foreign exchange
movements had sliced 4.6 percent from its security revenues.
Safran said total quarterly revenue rose 10.9 percent on a
like-for-like basis to 3.437 billion euros ($4.74 billion).
Aerospace propulsion and equipment revenues, which drive the
bulk of Safran's profits, rose 11 percent and 16.5 percent
"We are reaching production levels that we have never seen
before," said aerospace propulsion head Marc Ventre.
"There is some tension in the supply chain here and there,
but we are managing to resolve it as it emerges we are
delivering to schedule."
CFM expects to deliver 1,500 engines next year as well as in
2013, he added.
Safran meanwhile reaffirmed its interest in Italian space
contractor Avio Space, which is reportedly close to being sold
by Finmeccanica and private equity fund Cinven.
The French company wants to combine the booster engine maker
with its own solid propellant business, but analysts say it
faces tough competition from EADS unit Astrium for the
business whose value is estimated around 300-400 million euros.
"We think at a time when Europe is launching a successor to
Ariane 5...it would be good for Safran, Avio and the European
space programme to combine the businesses that make solid rocket
propellant," Herteman said.
Asked whether Safran had made an offer, he said, "We
generally follow our own logic". He declined to say when he
expected a decision.
Last year, Cinven and Finmeccanica reached a deal to sell
other Avio aeronautics activities for 3.3 billion euros to
($1 = 0.7564 euros)
(Reporting by Tim Hepher, Cyril Altmeyer; Editing by James
Regan and David Cowell)