French diversified aerospace, defence and security company Safran Group has revealed new moves which will re-orientate the company back towards aerospace manufacturing.
In an announcement on Monday, the company reportedly announced a review of many of its security holdings.
Primarily, Safran Group will look to sell off its airport explosives detection business, part of a wider subsidiary of the company called Morpho Detection.
“We have never been able to find any kind of synergies with the rest of the security businesses,” said Safran chief executive Philippe Petitcolin according to the Wall Street Journal.
The rest of Morpho Detection could also be up for sale, with company representatives reportedly saying that they would consider all options.
These moves were taken as Safran prepares to pivot the company back towards its main focus as an aerospace and defence manufacturer.
Currently the company already generates 28% of its revenue from the sale of jet engines, with significant addition revenues for other aerospace activities such as rocket motor and composite material production.
As well, on Monday Safran identified their aircraft component manufacturing business as one key area for expansion.
Fuelled by record jet engine sales, Safran now has a significant cash holding, causing speculation that it may engage in new acquisitions in the near future – something the company’s management has so far remained tight-lipped about.
Negative market reception
While Safran was keen to spin the re-orientation of the company in a positive light, it did not receive the same reception from the markets.
Upon announcement of the security-related sales, the company’s stock price saw an immediate fall of around 9%, before regaining some of these losses over the next days.
One possible reason for this is that Safran’s security business is far from failing, and Morpho Detection alone reportedly generated $300-400m in revenues over the last year, making it an unusual sale.
As well, concerns persist that record profits from engine sales are not sustainable in the medium-to-long term, a factor which could weaken margins in the coming years.