October 27, 2017 / 9:18 AM / a year ago

UPDATE 1-France's Safran revises up revenue target as Q3 growth quickens

(Adds more detail, CEO comment, shares)

PARIS, Oct 27 (Reuters) - French aerospace company Safran on Friday raised its revenue forecast for 2017, after growth in its civil engines business and higher engine deliveries for the Rafale combat jet produced stronger than expected third-quarter sales.

The maker of aircraft engines, landing gear and military optronics said adjusted revenue grew 8.5 percent to 3.82 billion euros ($4.4 billion) in the quarter. Sales rose 11.3 percent on an underlying basis.

The widely-watched civil aftermarket grew 10.4 percent in dollar terms in the first nine months, including 14.5 percent year-on-year growth in the third quarter.

Safran’s shares rose 1.7 percent, outpacing the French CAC40 index which rose 0.9 percent.

The French company raised its forecast for adjusted revenue growth in 2017 to 3 percent from 2-3 percent, and confirmed other targets, including operating income close to 2016 levels.

But it said its 2017 operating earnings could be held back by 350-400 million euros in costs from a switch to the new LEAP jetliner engine, up slightly from 300-350 million euros.

This includes provision for the cost of dealing with the premature loss of a special coating on part of some of the engines, Chief Executive Philippe Petitcolin said.

Ensuring a smooth ramp-up in the new production of the new engine, co-developed with General Electric for the most popular Airbus and Boeing jets, is Safran’s biggest priority.

Safran said it was meeting targets for the LEAP engine, produced by the Safran-GE joint-venture CFM International, but softened language used to describe its goal.

In April, it predicted around 500 LEAP deliveries in 2017. Safran and GE talked in the summer of 450-500 deliveries and in its latest release, Safran said it was on course for “over 450”.

“We are still in line and I don’t see as of today why we could not do that, so yes we are going to deliver more than 450 engines in 2017,” Petitcolin said.

GE said last week CFM had delivered 111 LEAP engines in the third quarter including 23 retrofitted for Boeing following a turbine disk problem in May. Safran said in July it had found a quality issue with some engines for Airbus.

Safran also said it was working on a new timetable for the Silvercrest business jet engine, whose certification has been delayed after a development glitch.

Petitcolin told reporters he expected the delay to last a matter of months but could not yet give a new date for engine certification, previously planned for 2018.

“There are several options and scenarios and we working to minimise the impact,” he said.

Dassault Aviation said this month that its Falcon 5X jet, which had already been delayed to 2020, would be postponed again after Safran identified problems with the high-pressure compressor.

$1 = 0.8595 euros Reporting by Tim Hepher and Cyril Altmeyer; Editing by Sudip Kar-Gupta and Jane Merriman

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