UPDATE 3-Safran sees deal soon to buy chemicals unit

* Significant progress in talks to buy SNPE propellants unit

* Q1 sales down 2.5 percent

* Confirms 2010 outlook

* Shares slip 2.4 pct

(Adds shares)

By Matthias Blamont and Tim Hepher

PARIS, April 20 (BestGrowthStock) – French aerospace group Safran
(SAF.PA: ) has made “significant progress” in talks to buy the
propellants unit of state chemicals firm SNPE and expects to
finalise a deal in coming months, its chief executive said.

Safran has been in talks for years to buy SNPE Materiaux
Energetiques (SME), part of a historic armaments group tracing
its roots to 13th-century gunpowder, while treading cautiously
on separate asset swap talks with defence firm Thales (TCFP.PA: ).

“There has been significant progress in the past few weeks,
so I hope to wrap this up in coming months,” Jean-Paul Herteman
told journalists after unveiling a dip in first-quarter sales.

Herteman told Reuters last month that a deal to acquire SME
had “never been closer” but that a final agreement depended on
environmental liabilities, with Safran reluctant to pick up the
bill for any inherited pollution claims. [nLDE62F0H2]

SME makes propellants for everything from France’s ballistic
nuclear missiles to the air bags in European cars. It also
builds the solid rocket motors for the Ariane 5 space rocket.

Safran sees synergies with its own work on some of those
projects and wants to reduce dependence on cyclical markets.

Herteman declined to comment in detail on talks last week
with the chief executive of Thales on a government push to rejig
certain defence assets to reduce procurement costs.

He said the two companies were engaged in exploratory
discussions but that there was “nothing new to report”. Safran
is seen as reluctant to be rushed into a deal.

The government owns about 30 percent of both companies.

Herteman was speaking after Safran posted first quarter
revenues down 2.5 percent while reaffirming 2010 targets for
stable revenues and moderately higher core operating profit.

The French partner in the world’s largest aero engine
manufacturer, CFM International, a 50-50 joint venture with
General Electric (GE.N: ), said defence and security helped offset
depressed business jet markets and continued Airbus A380 delays.

Safran shares fell 2.4 percent to 18.45 euros by 0800 GMT,
underperforming a firmer market, which saw the blue-chip index
(.FCHI: ) gain 0,5 percent.

Aerospace propulsion sales weakened 1.7 percent to 1.311
billion euros but dipped just 0.4 percent on an underlying
basis, supported by higher CFM56 engine deliveries and a buoyant
after-market in military engines and certain civil engines.

Safran makes engines for jetliners and warplanes as well as
defence and security equipment. It was formed from a merger of
state engine maker Snecma with electronics group Sagem in 2004.

Hertemen said he saw no recovery in business and regional
jets this year but airliner demand was poised for some recovery
as Airbus (EAD.PA: ) prepares to hike output in late 2010.

Quarterly sales of aircraft equipment such as landing gear
and engine nacelles fell 9.6 percent on weakness in business and
regional jet markets and a drop in the number of nacelle engine
housings for the Airbus A380 (EAD.PA: ) to 9 from 19 a year ago.

Defence and Security divisions posted revenue increases of
2.9 percent and 9.3 percent respectively.
(Editing by Louise Heavens)

UPDATE 3-Safran sees deal soon to buy chemicals unit