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Safran profits rise on strong aftermarket for aero engines

* Shares drop on security division performance

* Still working on Avio Spazio deal

By Cyril Altmeyer and Tim Hepher

PARIS, Feb 20 (Reuters) - Record demand for new jet engines and stronger than expected maintenance activity for those already flying lifted profits at Safran last year and the French group said it expected that growth to continue.

However, some analysts said the aerospace, security and defence firm's forecast for group revenue and profit in 2014 was not as strong as hoped for and the shares were down 1.7 percent at 52.60 euros by 0849 GMT.

Civil aftermarket sales rose 19.2 percent in dollar terms in 2013, compared with a company target of around 10 percent, and Safran said growth largely came from a wave of overhauls for recent versions of the most-sold jet engine, the CFM56.

CFM, the world's largest jet enginer maker by volume, is co-owned by Safran and General Electric, with its engines powering Boeing 737s and around half of the Airbus A320 family of aircraft.

Repairs and maintenance are a major source of profits for jetmakers and are seen as a barometer of economic activity because they are spaced out according to the number of flights, which in turn are closely correlated to gross domestic product.

Chief Executive Jean-Paul Herteman said the strength of the pick-up was partly due to airlines carrying out maintenance deferred during the economic crisis, when many carriers reduced frequencies to control capacity and hold up ticket prices.

Experience of past economic crises had shown that such spikes in aftermarket demand could last a few years.

"The catch-up effect is well and truly there...(and) we have not reached the end of that period," he said.

At the same time, major planemakers are producing record numbers of new jets. Asked whether Safran could keep up with possible further increases, Herteman said "yes, we can", but declined to say what targets were being discussed.

The 40-year-old CFM partnership delivered a record 1,502 CFM56 engines in 2013.

Safran said it expected sustained growth in profitability on the back of "increasing aircraft assembly rates and to the maturing installed base of civil aircraft engines".

The company posted a 24 percent jump in the group's recurring operating income last year to 1.788 billion euros on sales up 8.4 percent at 14.695 billion euros. Analysts had on average expected profits of 1.761 billion euros on sales of 14.79 billion.

Net attributable income rose 22 percent to 1.193 billion euros, compared with an average of analysts' forecasts of 1.082 billion, according to Thomson Reuters I/B/E/S Estimates.

For 2014, Safran predicted mid-single-digit percentage growth in adjusted revenues and low-double-digit growth in adjusted recurring operating income, with free cash flow representing close to 40 percent of that core operating profit.

The group, 22.4 percent owned by the French government, proposed a 17 percent increase in its dividend to 1.12 euros.

Finance Director Ross McInnes also said Safran was "not standing still" on acquisitions after almost 1 billion euros in deals in the past year.

The company was "still working" on discussions surrounding the future of Italian space propulsion company Avio Spazio, Herteman told reporters. He called for a decision before a European ministerial conference on space at the end of the year as Europe faces increased competition from the United States.

British private equity fund Cinven wants to sell its 81 percent stake in Avio Spazio and has said several buyers, including Safran, have expressed an interest. Airbus Group is also widely seen as a bidder.