Safran in Talks Over Future of ID & Security Business--Update

By Robert Wall

LONDON--French aerospace supplier Safran SA is in talk with several groups over the future of its identity and security business after it reported first-half operating profit rose 11%, propelled by strong demand for new aircraft engines.

Safran has narrowed discussions to five groups that should deliver their offers for the business by mid-September, Safran chief executive officer Philippe Petitcolin said. A decision on the future of the business could be made still this year.

Mr. Petitcolin said the company hasn't decided whether it would pursue an outright sale or some partnership. The goal is to find the best way to develop the business, he told reporters.

Operating profit was 1.3 billion euros ($1.4 billion) compared with EUR1.2 in the year prior period. Sales in the January through June period advanced 6.3% to EUR8.9 billion.

Safran reported a 25.9% decline in its adjusted net profit to EUR862 million after the prior-year figure was bolstered by the one-time gain from a disposal.

Strong demand for Airbus Group SE and Boeing Co. jetliners has helped lift Safran's results. The French company makes engines and other airliner equipment for some of the world's most popular planes.

"Production rates of equipment and engines for current-generation aircraft have never been higher," Mr. Petitcolin said. Operating income reached a company record 14.6% of sales, he said.

Airbus this month delivered the first A320neo single-aisle jet powered by Leap-1A engines made by a joint venture of Safran and General Electric Co. Production of those engines is accelerating quickly amid strong demand for the plane.

Mr. Petitcolin said "the challenge of the Leap ramp-up will intensity" and that the company was "fully mobilized" to deliver.

United Technologies Corp., which offers a rival engine for the Airbus plane, struggled early to get engines delivered in the proper configuration. Airbus has been stuck with more than 20 planes without engines as a result. United Technologies has said the issue was being fixed and that engine deliveries would accelerate to allow Airbus to meet this year's delivery target for all A320neo planes using its turbine.

Safran confirmed its full-year guidance, including an increase in sales at low-single-digit levels and a 5% increase in adjusted recurring operating income. The company stuck to its plan to reach break-even on shipments of Leap-1A engines before the end of this decade.

Engine-related revenue, Safran's biggest business, delivered the strongest growth at 8.3%, plane equipment sales rose 5.3% and security sales rose 7.2%. Only defense sales declined, down 5.2%.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

July 29, 2016 02:10 ET (06:10 GMT)

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