• Engine transition will restrain profitability, company says
  • Talks are under way with possible buyers for Morpho unit

Safran SA shares fell the most in more than a month after the aircraft-engine manufacturer forecast that its profit margin will be little changed until 2020 amid a shift to a new power plant.

Profitability through the end of the decade “should remain consistent” with 2015’s record of 14 percent as the company transitions to the new LEAP engine, Paris-based Safran said in a statement Monday before it briefs analysts and investors in London. Margins for the engine business will be “in the mid to high teens,” it said.

The forecast for engine margins “is at the low end of expectations,” Celine Fornaro, an analyst at Bank of America Merrill Lynch, said in a report.

Safran sank 5.6 percent to 55.91 euros at 10:50 a.m. in Paris. The shares dropped as much as 6.6 percent, the biggest decline since Feb. 8.

Safran said it’s targeting adjusted sales of more than 21 billion euros in 2020, a profit margin “trending above 15 percent” by then and a very strong increase in free cash flow compared with 2015. The company confirmed its confirmed its outlook for this year.

Safran is in talks with potential buyers for the Morpho security unit it is selling because it doesn’t fit with the company’s other businesses, Chief Executive Officer Philippe Petitcolin told reporters during a conference call. “The future of Safran lies in aeronautics and defense,” he said. Petitcolin added that the company was “looking at external opportunities” in aeronautic equipment.

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