Safran H1 profit rises but more supply chain snags ahead

French jet engine maker Safran (SAF.PA) posted higher first-half earnings and raised some forecasts as airlines bought more spare parts to serve a recovery in air travel, but warned supply chain problems could last well into 2023.

The world’s third largest aerospace supplier, whose products range from wheels to wiring and commercial engines to thrusters for satellites, said recurring operating profit rose 59% to 1.047 billion euros ($1.1 billion) as revenue increased 24% to 8.56 billion.

It upped full-year forecasts for revenue to 18-2-18.4 billion euros from 18.0-18.2 billion and for free cashflow to 2.4 billion euros from 2.0 billion. First-half free cashflow more than doubled to 1.665 billion euros as advances poured in for Rafale fighters, for which Safran builds the M88 engines.

Together with General Electric (GE.N), Safran co-owns the world’s largest civil jet engine maker by the number of units sold, CFM International, which supplies Airbus and Boeing. Both planemakers are receiving fewer engines than planned this year.

Safran suggested supply chain problems delaying engine deliveries could last well into next year.

“Problems with the supply chain will unfortunately continue and will probably extend into 2023 and may even last until the end of 2023,” Chief Executive Olivier Andries told reporters.

“It is to adapt to the reality of the situation that yesterday you heard (Airbus CEO) Guillaume Faury talk about adapting his plan for production increases in 2022 and 2023, without of course abandoning the long-term goal of reaching high production levels,” Andries said.

Airbus said on Wednesday it would reach an interim target of 65 narrow-body jets a month six months later than planned, in early 2024, but stuck to its end-target of 75 a month in 2025.

Safran’s widely watched civil aftermarket – or demand for spare parts and services – rose 47% in dollar terms in the first half.

That is mainly the result of demand for spare parts for the CFM56, the predecessor to the LEAP engine which powers all Boeing 737 MAX and about half of the Airbus A320neo fleet for which CFM competes with Pratt & Whitney (RTX.N).

Demand for travel on these workhorse, medium-haul jets is increasing everywhere except China, Safran said, adding demand related to wide-body jets was growing more slowly.

Delayed deliveries of Boeing’s 787 squeezed Safran’s wiring and landing gear activities, though Boeing said on Wednesday it was close to ending a year-old drought in 787 deliveries.

Safran’s loss-making aircraft seats business is also suffering from supply chain gaps and cost overruns, while a recovery in other cabin equipment is on track, it said.

GE on Tuesday posted higher quarterly profit led by its jet engine business, but said it too faced supply-chain issues.