Significant civil aftermarket demand helped Safran grow third quarter 2023 adjusted revenue by more than 20% to €5,825 million, up 25.1% to €16,770 million for the first nine months of the year. Sales increased by €3,477 million (+25.9%) on an organic basis.
“Safran continues to enjoy strong market tailwinds with narrowbody air traffic now trending well above pre-crisis level resulting in a strong demand for CFM56 spare parts,” said Safran CEO Olivier Andriès. “Our priority remains to ramp-up production while we still operate in a constrained supply chain environment. On the back of this solid nine months, we are comfortable with the delivery of our 2023 guidance raised at the end of July.”
Safran’s revenue growth was driven by its propulsion unit due to strong civil aftermarket activity (+39.0% in $) with solid demand for CFM56 spare parts and incremental benefits from price increase made in August. Spare parts revenue for high thrust engines was slightly up, said Safran, confirming that LEAP deliveries reached 389 units, compared to 347 units in Q3 2022 and to 419 units in Q2 2023. Over the first nine months of 2023, LEAP deliveries reached 1,174 representing a solid step-up in production (+45%) versus last year.
Aftermarket services were up 30% led by landing gears, carbon brakes and nacelles. Original Equipment (OE) sales increased by 16% during the quarter with higher volumes in landing gear (A320neo, A350), as well as in power and wiring. However, Safran noted that activities continued to be constrained by industry-wide supply chain difficulties and by downward revised demand impacting notably OE nacelles deliveries.
Safran’s aircraft Interiors revenue was boosted by 30.8% driven by aftermarket services both for Cabin (mainly spare parts) and Seats (of which A380 refresh for a Middle East airline).
Safran has confirmed its full-year 2023 outlook, with revenue expected to be at least €23bn, with recurring operating income of c.€3.1 billion and Free Cash Flow of at least €2.7 billion. The forecast is based on the assumption the company will increase its LEAP deliveries by 40-45%, not the 50% increase first noted.
On an earnings call, chief financial officer Pascal Bantegnie said that LEAP deliveries were not accelerating as fast as expected due to the supply chain performance, with persistent issues relating to sourcing of raw materials, and with forging and casting suppliers. He confirmed that Safran was still targeting 2000 LEAP deliveries for 2024 but any change would be noted in the company’s full year results in February next year.
Olivier Andriès commented on the bogus parts scandal where AOG Technics had been found to have falsified documents for certain CFM56 engines, which is currently being reviewed in the UK courts. “To the extent of our current knowledge, there are 145 engines that have been identified and impacted with suspected parts,” he said. “Half of those have already been removed and the other half will be removed in the short term future by airlines. This is less than 1% of the total number of engines flying today so the impact on the maintenance load worldwide is going to be absolutely minimal.”