* Sees strong year for jetliner engine sales
* Defence revenue down, security sales recover
* Aftermarket revenue below expectations, shares fall
* CEO declines to say whether wants new mandate
* French group still interested in Avio Spazio
(Adds analyst, Boeing earnings, GE comparison)
By Tim Hepher and Cyril Altmeyer
PARIS, April 23 France's Safran rattled
investors with first-quarter aerospace revenue hampered by
pressures ranging from delayed deliveries of defence equipment
to weaker helicopter sales and cold weather in North America.
The aerospace, defence and security group stood by an upbeat
forecast for the commercial aviation sector, driven by
emerging-market demand, and maintained a 2014 revenue target
despite a strong euro.
But its shares fell as much as 3.6 percent, leading France's
blue-chip CAC 40 index lower.
Overall revenue at the maker of products ranging from jet
engines to 'green' taxiing systems and from precision bombs and
bomb detectors, rose 3.3 percent to 3.443 billion euros,
compared with market expectations of about 3.6 billion.
Defence sales fell by a steeper-than-expected 12 percent due
to delayed deliveries of missile guidance systems, but Safran
said this would steady itself for the year as a whole.
Safran is a major supplier to Airbus and Boeing
, which are both producing record numbers of aircraft to
keep up with expansion in emerging markets - demand which helped
Boeing beat expectations for the quarter.
Safran is a joint partner with General Electric in
the world's largest engine maker by units sold, CFM
International, which reported 402 deliveries and 1,163 orders in
the quarter, bringing its backlog to seven years of production.
"The market remains very active and there are a number of
sales campaigns under way," Safran Chief Executive Jean-Paul
Herteman told journalists. "We are expecting a very, very solid
year in 2014."
A recent rise in the value of the euro dampened revenues by
53 million euros, illustrating growing headwinds for
export-driven European companies that report in the single
European currency and have to collect revenues in dollars.
Safran said its 2014 goal of mid-single-digit growth in
adjusted revenue would be "achievable" if the euro stayed at its
first-quarter rate of $1.37, up from $1.32 a year earlier.
On Wednesday, the euro stood at $1.3830.
Safran said it had softened the current impact by reining in
its average hedge rate by 2 cents to $1.27 from a year earlier.
Profits from U.S.-based operations also provided a cushion.
Smaller French aerospace supplier Zodiac Aerospace
said on Wednesday it too remained exposed to risks from the rise
in the euro, which penalizes especially the European aerospace
sector against dollar-based U.S. rivals.
Safran reaffirmed other targets including a low-double-digit
percentage improvement in core operating income and a 10-15
percent increase in the "aftermarket" for civil spares and
services, where engine makers often make most of their profits.
The benchmark civil aftermarket grew 12.4 percent in dollar
terms in the first quarter, compared with market expectations of
closer to 15 percent. Safran's engine partner GE posted 17
percent higher spares revenue for the same quarter.
"The figure is solid, but given the weaker comparable basis,
a more positive surprise could have been expected," said
Christophe Menard, head of aerospace and defence research at
Kepler Capital Markets in Paris.
The strongest quarterly gains in revenue came in equipment
such as landing gear for the Boeing 787, which is catching up
following earlier output delays and technical problems.
Boeing reiterated on Wednesday it expected to deliver 110 of
the high-tech 787s in 2014, almost twice the 65 seen last year.
Also on the positive side, Safran's Security revenue rose
for the first time in three quarters, adding 1.5 percent to 345
million euros after a boost from sales of detection systems.
Herteman said Safran was continuing to work on a possible
purchase of Italy's Avio Spazio, but had no further plans for
acquisitions in the United States beyond completion of the $270
million purchase of some assets from Eaton Corp,
expected in the first half.
British private equity fund Cinven wants to sell its 81
percent stake in Italian space propulsion company Avio and has
said several buyers, including Safran, have expressed interest.
Airbus Group is also seen as a bidder.
Herteman however sidestepped speculation about whether he
would seek to remain chief executive when his mandate at the
partially state-owned aerospace group expires in May 2015.
Such a decision would require a change in retirement age.
Herteman, 63, said there was no proposal to discuss this at
the company's annual meeting on May 27, but declined to say
whether he would like to stay for another term after 2015.
($1 = 0.7248 Euros)
(Additional reporting by Blaise Robinson; editing by James
Regan and Tom Pfeiffer)