By Olivia Bugault 
 

Safran SA raised its cash flow outlook for the year while maintaining its sales and profitability targets after booking higher revenue in its third quarter.

At 0747GMT, Safran trades 3.8% higher at EUR118.40.

The French aerospace company said Friday that it now expects to generate more than 1.5 billion euros ($1.74 billion) in free cash flow this year, compared with a previous guidance of above 2020 levels. Last year, Safran generated EUR1.07 billion in free cash flow. The company said it upgraded its target thanks in part to new advance payments on Rafale export contracts.

The company backed its other targets with its adjusted revenue expected to fall organically in the low single digits, while its 2021 adjusted recurring operating margin should increase by more than 100 basis points compared with its 10.2% margin in 2020.

Its outlook is based on assumptions that it will deliver around 900 LEAP aircraft engines this year, up from above 800 previously, it said.

"Safran's third-quarter revenue confirms that the recovery is gaining strength month after month, which makes us optimistic for the future," Chief Executive Olivier Andries said.

In its third quarter, adjusted revenue--which it says better reflects its performance and allows comparisons--was EUR3.73 billion, up 10.4% thanks to recovery in its services activities. Its consolidated revenue stood at EUR3.72 billion.

Its aerospace propulsion division performed the best with 16% growth in revenue for the period as civil aftermarket rebounded strongly. Revenue from civil aftermarket--which includes spare parts and maintenance, repair and overhaul activities for civil aircraft engines--rose 44% year-on-year and should continue to improve in the last three months, it said.

Civil aftermarket activities are a key profitability driver for Safran and therefore, the better-than-expected growth in the third quarter bodes well for full-year profits, Citi said.

On Wednesday, European plane maker Airbus SE confirmed its plan to ramp up production of its A320 jet family, saying it was targeting a monthly production rate of 65 by the summer of 2023, while it was still studying a potential increase to up to 75 a month by 2025. Safran--which produces engines that power the majority of A320s via its joint venture with General Electric CFM International--is committed to supplying enough engines for the 65 monthly production rate but see challenges if Airbus goes above, its Chief Executive Olivier Andries said during a call with journalists.

Olivier Andries also commented on the supply-chain situation, saying that there is tension regarding the availability of raw material.

 

Write to Olivia Bugault at olivia.bugault@wsj.com

 

(END) Dow Jones Newswires

October 29, 2021 04:13 ET (08:13 GMT)

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