* Jet interiors supplier maps out recovery plan
* Pledges return to historic profitability levels by 2020
* Shares fall 7 pct as 2016/17 forecast lags analysts'
* CEO deflects questions on Zodiac as takeover target
(Recasts after analyst meeting)
By Cyril Altmeyer and Tim Hepher
PARIS, Nov 22 French jet interiors supplier
Zodiac Aerospace pledged on Tuesday to return to
traditional levels of profitability by 2019-20, but its forecast
for next year fell short of analysts' expectations, driving its
shares down more than 7 percent.
It was the latest bumpy reception for the French group which
has struggled to convince investors that a two-year crisis in
seats and cabin output is fully under control, though analysts
welcomed signs that it is still bringing in new business.
Zodiac projected a 10-20 percent increase in 2016/17
operating profit after a 14.1 percent decline in the year to
"The forecast for 2016/17 is one quarter below consensus.
The following year is in line, but experience has taught the
market to distrust the group's mid-term predictions," a
Paris-based analyst said, asking not to be named.
By midday, Zodiac's shares were down 5.1 percent at 20.255
euros, having fallen as much as 7.3 percent against a slightly
firmer stock market.
Chief Executive Olivier Zarrouati set out a recovery plan
which he described as a "three-stage rocket," designed first to
erase delivery delays and quality problems, then underpin the
company's operational performance and finally restore margins.
The last stage will involve some restructuring to remove
costs related to the turnaround, which saw cost overruns
increase by 98 million euros ($104 million) in the past year.
Zodiac said this would bring its operating margins to what
it described as the historical level of mid-double digits by
2019/20. Margins previously peaked at 14.5 percent in 2012/13.
However, Zarrouati said it was taking longer than expected
to reduce excess costs, with overheads also above forecasts.
"It is taking a long time because we are transforming
industrial operations across the group," he told analysts.
For the financial year that ended in August, core operating
profit fell to 269.6 million euros, matching expectations, as
the operating margin fell 1.2 percentage points to 5.2 percent.
The company has approximately halved the number of
contractors brought in to resolve a crisis at its Santa Maria
seat shells plant in California and added alternative supplies.
In another troubled project, Zodiac said it was increasing
production of toilets which have delayed deliveries of the
Although new airplane orders have peaked, the market for
supplying seats for new jets or replacing seats on old ones is
Zodiac said it had received a draft deal from an unnamed
airline for its largest ever business-class seats order.
Zarrouati said plans by Rockwell Collins to buy
competing cabins supplier B/E Aerospace highlighted the
importance of connectivity in modern aircraft cabins.
He deflected questions about whether Zodiac could itself
become a takeover target.
"The purpose of this management team is to run our plan and
it is a standalone plan. Does it mean that we are ... not able
to take any good opportunity that would come? For sure not, but
any opportunity would have to be better than we are able to
deliver on our own."
There have been recent reports that France's Safran
was interested in buying Zodiac, but a source familiar with the
matter said in June that this was not on the agenda.
(Reporting by Cyril Altmeyer and Tim Hepher; Editing by Biju
Dwarakanath and Susan Fenton)