Safran Plans Avio Space Bid as Plane-Engine Earnings to Slow
Safran, based in Paris, has begun exploratory discussions with Turin-based Avio before any formal negotiations, Chief Executive Officer Jean-Paul Herteman said on a conference call.
“The businesses complement each other well, and this could be an opportunity,” Herteman said, adding that Safran’s Snecma unit has been partnered with Avio for years through their work on engines for Arianespace SA rocket launchers.
General Electric Co. (GE), Safran’s ally on the CFM56 engine used on Boeing Co. (BA) 737 and Airbus SAS (EAD) A320 planes, agreed in December to buy Avio’s aircraft-engine business for $4.3 billion from Cinven Ltd. The French company had been among potential suitors, together CVC Capital Partners Ltd. and Clessidra SGR SpA, according to people with knowledge of the negotiations.
Safran said today in a statement that its sales growth will probably slow to 5 percent this year from 16 percent in 2012. An increase in operating profit may also be limited to a percentage in the “mid-teens,” compared with a 24 percent jump last year.
“We expect growth to gradually slow as volume increases level off,” said Nick Cunningham, a London-based analyst at Agency Partners with a hold recommendation on the stock.
Safran dropped as much as 5.3 percent, the biggest slump since Dec. 13, 2011, and was trading 3.1 percent lower at 33.97 euros as of 11:32 a.m. in the French capital. The share price has declined 3.1 percent this year.
Net income jumped 55 percent to 999 billion euros last year as revenue increased 16 percent to 13.6 billion, Safran said today. The company posted a record backlog of 48.5 billion euros, up from 43 billion euros a year earlier.
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