Jet engine maker Safran raises targets after record first-half margin

By Tim Hepher and Florence Loeve

PARIS, July 28 (Reuters) - French jet engine maker Safran raised full-year targets and saw its shares rise on Tuesday after reporting stronger-than-expected first-half profits, driven by demand for spare parts.

The French company joined its civil jet engine partner GE Aerospace in boosting the outlook as a buoyant aftermarket business helped lift its first-half operating margin to a record 18.4%, despite concerns over supply chains and the war in the Middle East.

"Civil aircraft activity (remains) well above our pre-conflict forecasts," CEO Olivier Andries told analysts.

Safran shares were up 2.2% in midday trading, outpacing a slightly firmer French market.

CFM, the world's largest jet engine maker by units sold and co-owned by Safran and GE, is reaping maintenance profits from its CFM56 jet engines, which continue to power thousands of planes despite being succeeded by the more recent LEAP model for current Boeing and Airbus narrow-body jet deliveries.

Rising profits and spare parts prices from engine makers have drawn severe criticism from airlines but Andries said CFM's priority was to serve the needs of carriers, while generating adequate returns from major investments in engine technology.

Safran said its mid-year recurring operating profit jumped 29% to €3.24 billion ($3.68 billion), beating market forecasts, while revenue rose 19% to €17.57 billion. Widely watched sales of spare parts for civil engines rose 27.9% in dollar terms.

Analysts were on average expecting recurring operating profit of €3.06 billion on revenue of €17.47 billion.

DEFENCE MOMENTUM

Safran raised its percentage target for full-year revenue growth to the "mid-teens" from a previous "low-to-mid-teens".

Safran also predicted full-year operating profit of €6.4 billion to €6.5 billion, up from a previous goal of €6.1 billion to €6.2 billion, and raised its forecast for growth in LEAP engine deliveries to "high teens" from a previous target of 15%.

GE Aerospace last week raised its 2026 revenue and profit forecasts, driven by demand for engine services and equipment.

Andries said CFM's LEAP engine production had surpassed 500 units for the fourth quarter in a row, though Safran continues to diversify sources of suppliers wherever possible.

He reported strong momentum in defence, with the company ramping up capacity and investing in areas like positioning and navigation. Safran remains open to disciplined acquisitions in defence, Andries added.

Questions remain, however, over the future of Safran's fighter-engine joint venture with Germany's MTU Aero Engines after the collapse of a Franco-German-Spanish FCAS fighter.

Andries said the venture, which sources say has operated smoothly in contrast to feuding that triggered the collapse of the fighter itself, is funded until September and its future will depend on paths each country takes in future developments.

Safran cannot commit to two entirely different next-generation military engines and will give priority to France's military development requirements, he added.

Sources familiar with the matter say the engine venture is set to close with its engineers redeployed in the absence of new funding, unless France and Germany decide to develop two broadly similar planes, something most analysts now consider unlikely.

($1 = 0.8797 euros)

(Reporting by Tim Hepher, Florence Loeve; Editing by Jamie Freed and Louise Heavens)