(Adds details on row with TCI hedge fund)
PARIS Feb 24 France's Safran posted a
5.4 percent rise in 2016 core operating profit to 2.4 billion
euros ($2.5 billion) and projected stable underlying income in
2017, a transitional year as it increases production of its new
LEAP commercial jet engine.
The engine and parts maker, which recently set out an agreed
offer for Zodiac Aerospace, said growth was driven
mainly by its aircraft equipment division where overhauls of
aircraft wheels and brakes fuelled higher service revenue.
Bernstein analysts said Safran had performed in line with
expectations across its divisions in 2016, as it changed the way
it presented earnings to reflect the soon-to-be-completed sale
of its security business.
"Until next year, we believe the Zodiac transaction will
overshadow underlying fundamentals of the company, limiting
share price performance," they said in a note.
Chief Executive Philippe Petitcolin called the Zodiac
takeover a "unique opportunity" as a row rumbled on with hedge
fund TCI Fund Management over the deal's merits.
The U.K.-based fund has questioned the strategy of adding
Zodiac's mainly aircraft interiors business to Safran's
propulsion activities, as well as the valuation placed on Zodiac
and the methods for approving the $9 billion transaction.
The debate ticked over on results day as a Societe Generale
analyst backed TCI's call for an early shareholder vote on plans
to merge Safran and Zodiac, while supporting the deal itself.
Safran reiterated the law did not call for such a measure
and defended its strategy for buying the French firm.
TCI said it had support from others in the financial
community and called the tie-up "a destruction of value." Safran
finance director Bernard Delpit insisted it had received a
positive reaction from most investors.
Petitcolin meanwhile set out detailed plans to ensure that
Zodiac would meet the latter's target of returning to
traditional margins of at least 14 percent by the end of the
decade, key to achieving Safran's financial goals.
He said Safran would impose strict development guidelines,
shore up the supply chain and bring in expertise in
certification - typically a problem area for aircraft seat
makers who must get fresh approval for many customised designs.
TCI accuses Safran is acting on faith alone because it was
unable to perform due diligence on Zodiac.
Petitcolin also played down the risk of merger discussions
distracting from Zodiac's efforts to speed production of cabin
equipment for the Airbus A350, a concern expressed by Airbus's
planemaking chief this week.
Safran's business is dominated by its 50 percent share
alongside General Electric in CFM International, the
world's largest jet engine maker by the number of units sold.
Safran said production and testing of CFM's new LEAP engine
was going to plan.
It said it would invest 850 million euros to support a
transition between engine models.
China's Comac could start taxi trials for its LEAP-powered
C919 in the next two weeks and may stage a maiden flight of its
challenger to Airbus and Boeing in April, Safran said.
($1 = 0.9440 euros)
(Reporting by Tim Hepher, Cyril Altmeyer, Maiya Keidan; editing
by Jason Neely/Ruth Pitchford)