Safran First-Half Profit 35% Higher, Chairman to Resign


The boss of French conglomerate Safran, Jean-Paul Bechat, delivered a 35% leap in first-half operating profit, led by aero engines, as he prepared to step down with a pay-off of some 3 million euros.

The aerospace and telecoms equipment group said on Friday operating profit rose to 311 million euros in the first half as the margin rose sharply to 5.4% from 4.2%.

The figure was however slightly below market forecasts with analysts on average expecting an operating profit of 336 million on already-reported sales up 4.7% to 5.733 billion euros, according to Reuters Estimates.

The firm saw its first-half net profit rise 62% to 215 million euros compared with a consensus of 208 million.

It was the last time Bechat, who turns 65 on Sunday, signed off on results which have wobbled considerably since he took the state-owned Snecma aero engine maker into an unexpected merger with private firm Sagem in 2004.

The merger created a beast described as "neither fish nor fowl" by investors -- combining engines for combat jets and jetliners with Sagem's mobile handsets and fax machines -- but led in particular to an ugly war of attrition internally.

The barely disguised in-fighting exploded in public late last year when Bechat disclosed unexplained accounting entries at the group's former Sagem defence security division.

Bechat agreed to step down in September but will be brought back to the supervisory board when a space opens up, the company said, adding he would receive a pay-off of two years' salary. 

Bechat received fixed and variable compensation of 1.46 million euros in 2006, according to the annual report.

In public he has always defended the government-sponsored merger, but has rarely shied away from promoting the superior growth performance of the aero engine business where he first cut his skills as a Snecma production engineer.

Mobile Woes

The merger has also been clouded by losses at the former Sagem communications division which Bechat put up for sale.

The division lost 73 million euros in the first half.

"Mobile phones recorded a steep drop to a loss of 94 million euros, due to the sharp decrease in volumes during the first half of the year, with the positive impact of partnerships formed during this period yet to be felt," Safran said.

It said broadband activities continued to improve.

Buoyed by recent strong demand for passenger jets, Safran's first-half aero engine profits rose 31% to 297 million euros with a margin of 10.7%.

The defence security division returned to profit with a 25 million euro surplus, compared with a 44 million euros loss in the same period last year.

"The group's aerospace, defence and security businesses will continue sustained growth. Therefore, at constant size, Safran confirms its objectives for 2007," the company said.

It targets sales growth of around 5% and an operating margin above 5%. It was 5.4% in the first half.

Some analysts had expected an increase in forecasts.

In July, Sagem started talks with Ingenico on transferring Sagem's electronic payment solutions. "If the operation under consideration is successfully completed, it could generate a substantial capital gain," Safran said.