Safran Sees Income Margin, Revenue Growth Through 2025 -- Update
By Olivia Bugault
Safran SA said Thursday at its capital markets day that it
expects profit margin and revenue to grow through 2025, and
disclosed other mid-term targets such as for free cash flow and
The French defense-and-aerospace company said it expects
recurring operating income margin to reach 16% to 18% by 2025. The
target would represent "more than 5 points margin expansion from
2021, mainly driven by growth in services across all divisions," it
said. In 2024 and 2025, its margin should expand faster than during
the 2021-23 period.
Its propulsion division--its biggest segment by revenue--is
expected to reach the highest margin, with an recurring operating
margin of more than 20% by 2025. For its equipment and defense
unit, it targets a recurring operating income margin at around 15%
by 2025 and above 10% for its aircraft interiors division.
In the first half of 2021, Safran's recurring operating income
margin stood at 9.6% of sales. In 2019, before the pandemic hit its
activities, its margin was at 15.5%.
Meanwhile, Safran expects its organic revenue to grow on average
by at least 10% per year from 2021 to 2025, with civil
aftermarket--which includes spare parts and maintenance, repair and
overhaul activities for civil aircraft engines--growing around 15%,
"CFM56 and LEAP engines will remain the core drivers of the
profitable and fast growing civil aftermarket business of Safran,"
the jet engine maker said.
Regarding cash, Safran expects to generate around 10 billion
euros ($11.32 billion) in cumulated free cash flow between 2021 and
2025, it said.
All figures are on an adjusted basis, which Safran favors,
noting that it better reflects its performance and allows
"The messages are, in our view, overall positive on business
dynamics, cash generation and capital allocation," UBS said about
Safran's new targets and strategy.
The company added that it expects to resume its "historical
practice" of distributing 40% of its net income to shareholders
through a dividend that it would pay in 2023 in relation to its
fiscal year 2022, and that beyond 2023, the board of directors will
review this dividend practice "in order to ensure growing and
attractive returns to shareholders."
Regarding its acquisition of Zodiac Aerospace in 2018, the
company said a portfolio review has determined 70% of its
businesses as core, and 30% under assessment. This review could
also lead to divestments and bolt-on acquisitions, it said.
Safran, and the aviation industry at large, has been hit hard by
the coronavirus pandemic, with its aircraft interiors division
suffering the biggest blow. The recent emergence of the Omicron
variant has again spooked the market and sent aviation and travel
stocks falling. Safran shares dropped roughly 8% between Nov.
26--when the Omicron variant first triggered market concerns--and
Wednesday's closing price.
However, Chief Executive Olivier Andries noted during last
quarter's results on Oct. 29 that "Safran's third-quarter revenue
confirms that the recovery is gaining strength month after month,
which makes us optimistic for the future."
At 1038 GMT, Safran trades 1% higher at EUR104.10. Safran is one
of the best performers on French index CAC 40, with most companies
in the red.
Write to Olivia Bugault at email@example.com
(END) Dow Jones Newswires
December 02, 2021 05:58 ET (10:58 GMT)
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