October 30, 2017 / 6:00 PM / a year ago

Zodiac Aero predicts rebound after seats crisis hit profit

PARIS (Reuters) - Zodiac Aerospace, which is in the midst of being taken over by French aerospace group Safran (SAF.PA), predicted sharp growth in operating income this financial year after the tail end of an industrial crisis at its seat plants hit 2016/17 profit.

FILE PHOTO - The logo of French aircraft seats and equipment manufacturer Zodiac Aerospace is seen in Paris, France, April 20, 2016. REUTERS/Benoit Tessier

The Paris-based maker of aircraft interiors and systems like emergency slides also predicted a slight drop in sales in the year to end-August 2018, led by seat revenues after a previously announced 1.6 percent sales decline in 2016/17.

Operating profit in the year to end-August 2017 fell 19.3 percent to 217.6 million euros (191.76 million pounds), in line with latest forecasts from the group which has suffered a spate of profit warnings due to industrial difficulties.

Analysts were on average expecting operating profit of 204 million euros, according to Thomson Reuters I/B/E/S data. For 2017/18, analysts expect operating profit of 403 million euros.

Both sales and operating profit will be significantly higher in the second half of 2017/18 than in the first, Zodiac said.

Zodiac, which reduced its net debt by 19.9 percent in 2016/17, said cash generation should be strong this year due to action it is taking to reduce inventories.

It said its priority was to restore the faith of its customers after disruption to interiors and seats production, which in turn delayed deliveries of Airbus and Boeing jets.

Zodiac has significantly reduced delays in delivery of cabin equipment and seats and expects to complete a turnaround of its production plants by the end of the first quarter of 2018, Chief Executive Yann Delabriere told analysts.

This will include an unspecified investment to upgrade facilities in the United States, reversing what recently appointed Delabriere called a period of under-investment.

Safran, which won Zodiac’s approval for a friendly takeover at the second attempt earlier this year after the company was weakened by the industrial problems, last week reaffirmed plans to launch a formal offer for Zodiac by year-end..

Reporting by Cyril Altmeyer and Tim Hepher; Editing by Mark Potter

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