Newly merged French technology giant sails through first six months, but difficult decisions lie ahead

Jean-Paul Béchat and the board of French aerospace and communications giant Safran face some hard decisions almost six months after the controversial marriage of aeroengines and equipment manufacturer Snecma and mobile phones to defence electronics supplier Sagem.

BechatWith the honeymoon over and the publication of the group’s first consolidated half-year results, Safran’s bosses have met their promises made to shareholders earlier this year, but challenges include how to squeeze enough synergies and efficiencies to see returns from the merger of two very different companies, and what to do with the loss-making mobile phones unit – Sagem’s flagship business, but the victim of a ruthless global price war.

On paper, Safran’s performance – led by the former Snecma businesses – has been robust for the six months. There were a record 1,000-plus orders for CFM56 engines, which Safran markets through its CFM International joint venture with General Electric, and almost 600 orders for Turbomeca helicopter engines. Speaking at last week’s results in Paris, chairman and chief executive Béchat said it had also been an “exceptional period” for the equipment division, which includes the Messier-Dowty landing-gear business, as well as nacelles, brakes and engine controls. This was thanks to a swathe of contracts for the Airbus Military A400M airlifter and production ramping up for the Airbus A380 and Boeing 787, on which Safran is a major supplier.

Overall, orders were up 50% in the first half (the comparison is with the pre-merger Sagem and Snecma), with the two former Snecma businesses increasing their profit contribution by between a fifth and a quarter. The former Sagem defence security division, whose products include anti-missile defence, avionics and biometric systems, saw its sales rise and notched up a profit, but its profitability fell for the six months.

The Sagem communications division – Europe’s number two in mobile phones – recorded a €13 million ($15.8 million) loss. Béchat promised to keep faith: “We will reach break-even, but I can’t say when,” he said.

Although early to point to significant wins as a result of combining technologies and marketing positions, Béchat said the recent Moroccan decision to select a Safran-Thales team to re-engine its air force’s Dassault Mirage fighters was “a success because with our size we were able to persuade them that we could rise to the challenge”.

Combined teams have been using technologies from both former companies to build new electronic braking systems for the 787 as well as “three or four other products”, he said. Overall revenues were up 2.3% for the period to €4.94 billion, with pro forma net income 8.8% higher at €209 million.


Source: Flight International