Safran SA: Company Strategy & Performance Analysis
Safran S.A. (Safran) is a French multinational aircraft engine, rocket engine, aerospace-component, defense, and security company, formed by the merger between the aircraft and rocket engine manufacturer and aerospace component manufacturer group SNECMA and the security company SAGEM in 2005. The products developed by the company include helicopter turbines, mechanical, hydro-mechanical and electromechanical equipment for the aeronautics industry, military avionics and aeronautic system engines and parts for civil and military aircraft, defense and security equipment, navigation equipment, optronic systems, biometric identification systems and secure transaction terminals.
The company leverages on its strong service portfolio to drive revenue. It’s offering includes shop maintenance, on-site maintenance, repairs/spares parts, asset management, and consulting services. The company’s aircraft engines offers a complete range of engine services, including performance restoration, replacement of life-limited parts, and inspection and maintenance of the entire engine. It also offers components and subassemblies. The company's strong service offering enabled it to drive the MRO revenue.
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Order backlog to drive future growth
Safran S.A posted strong order backlog of US$69.2 billion in 2016, as compared to US$65.2 billion in 2015. The backlog increased at 6.1% basis in 2016 despite a challenging market. The overall backlog (CFM56 + LEAP) represents more than 13,800 engines at December 31, 2016. The LEAP engine reported 1,801 firm orders and purchase commitments in 2016. The backlog for LEAP stood at 11,563 orders and purchase commitments at the end of the year for the A320neo, Boeing 737 MAX and COMAC C919 programs.
MRO service portfolio enables the company to support revenue
In 2016, the MRO revenues from the Aircraft equipment segment increased at a growth of 10.3% from US$1,639.7 million in 2015 to US$1,808.7 million in 2016. The growth in revenue was attributed to higher CMF fleet in service. Similarly, the MRO revenue from Aerospace Propulsion segment increased at 6.9% from US$3,873.4 million in 2015 to US$4,142.5 in 2016, owing to the increased nacelle service activity.
Increased deliveries of equipments driving aircraft equipment segment
The net sales of Aircraft Equipment segment increased from US$5,487.7 million in FY2015 to US$5,688.1 million in FY2016, an increase of 3.7% over 2015. On an organic basis, the revenue increased by 3.5% and service revenue accounted for 31.8% of sales of the segment’s revenue. OE revenue grew by 1.4%, driven by the delivery of A350 wiring and landing gear shipsets, LEAP nacelles for the A320neos, and wiring and landing gear for the A320ceo and A320neo.