In the context of geopolitical tensions, Safran Group seeks alternative suppliers of rare earths
French aircraft engine manufacturer Safran Group has stated that it is stockpiling rare earth elements and seeking alternative suppliers to protect the company from the impact of what its CEO describes as the weaponization of critical materials.
Rare earth elements are used in a wide range of products, from fifth-generation fighter jets, submarines, and radars to electric motors. In recent years, as these critical materials have moved to the forefront of trade disputes, defense manufacturers' concerns over rare earth supplies have intensified.
Safran Group CEO Olivier Andries said during a conference call with analysts on Friday that the company hopes to find alternative suppliers of rare earths. He noted that rare earths have been weaponized by some countries as geopolitical tensions escalate.
"Regarding rare earths, we are building up inventories while also establishing some alternative supply chains," Olivier Andries stated. "Our focus is not only on continuously improving competitiveness but also on enhancing the resilience of our supply chain."
Olivier Andries noted that Safran's supply chain saw overall improvement throughout last year, but it has not yet reached the company's desired level.
Benefiting from strong demand for aircraft engine services and weaponry, Safran has raised its performance guidance for 2028.
The company now expects adjusted recurring operating profit (its core earnings indicator) in 2028 to be between 7 billion and 7.5 billion euros (8.31 billion to 8.90 billion US dollars), up from its previous forecast range of 6 billion to 6.5 billion euros.
For this year, Safran expects adjusted recurring operating profit of 6.1 billion to 6.2 billion euros, higher than the market consensus of 6.08 billion euros compiled by the company.
In early European trading, the company's share price rose 7.8%. If this holds until the close, it would mark the largest single-day percentage gain in nearly four years.
Bernstein analysts commented that Safran is usually conservative when issuing performance guidance, which means there may still be further upward adjustments before 2028.
Safran is benefiting from record-high air passenger volumes and factors such as delays in the production of new aircraft, which have prompted airlines to maintain older planes.
The company, which co-manufactures engines for Airbus aircraft, stated that deliveries of LEAP engines continue to rise, reaching a record 1,802 units in 2025 and expected to increase to around 2,600 units by 2028.
The Ukraine conflict and the global rearmament race have also driven Safran's order growth. The company is increasing production of the AASM "Hammer" guided bomb, which can be equipped on Dassault Aviation's Rafale fighter jets and is also supplied to Ukraine for use on its aging Soviet-designed aircraft.
Olivier Andries stated that the "Hammer" bomb has been extremely successful in export markets, recently securing an order of several hundred units from Norway. He noted that over the past three years, Safran has increased production of this bomb to four times its original level and will continue to expand capacity.
Safran's defense business has also benefited from growing demand for missile seekers, navigation, and timing systems.
The company announced that adjusted recurring operating profit for 2025 was 5.20 billion euros, up 26% year-on-year; adjusted revenue surged 15% to 31.33 billion euros. Net profit reached 7.18 billion euros, compared to a loss of 667 million euros in the same period last year, mainly due to a 4.67 billion euro foreign exchange hedging loss recorded last year.
Safran stated it will increase its dividend by 16% to 3.35 euros per share.
Editor: He Yun
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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