French manufacturer details plan to maintain operating margin and sales growth
Snecma plans to increase purchasing in the USA and emerging markets and restructure its supplier portfolio as part of the French propulsion and equipment manufacturer's drive to keep its operating margin stable, increase net income and continue sales growth.
Operating income rose from €476 million ($612 million) in 2003 to €511 million in 2004, in line with analysts' expectations. The company booked consolidated orders of €7.7 billion in 2004, including service and maintenance contracts, taking its orderbook to €13.8 billion by the end of the year, 9.5% higher than at the end of 2003. Snecma attributes the increases to a gradual recovery in the aviation industry and in air traffic. The civil sector accounted for 77% of sales.
Meanwhile, telecommunications firm Sagem, which is due to merge with Snecma, posted a 12.3% increase in revenue to €3.6 billion. The companies agreed the merger last November and opened the public offer process in January. It is due to end on 23 February with completion of the merger expected on 11 May.
Snecma's propulsion business saw an 9% increase in sales to €4.5 billion and a 33% increase in operating profit to €384 million. The propulsion division accounts for 63% of the group's consolidated sales before elimination of inter-branch sales.
In the group's equipment division sales were up 4.6% on the previous year, to €2.6 billion. Snecma says it has made "strong inroads" at Boeing, with companies in the Snecma group being selected to supply the landing gear, electric brakes and all wiring for the 787. Analysts had predicted stronger growth in the division, but higher-than-expected investment in research and development in the second half of the year hit margins, with the division's operating incomefalling 16% to €167 million, compared with the previous year. Analysts expect the level of R&D investment to continue in 2005/2006. Snecma says "overall improvement in productivity more than offset the increase in R&D spending".
Long-term maintenance, repair and overhaul contracts helped to sustain the group's service business. It accounted for 37.6% of consolidated sales, compared with 35.4% the previous year.
HELEN MASSY-BERESFORD / LONDON
Source: Flight International
