(Reuters) – CAE Inc shares listed in Toronto and in the United States tumbled more than 16% on Wednesday after the world’s largest civil aviation training company’s quarterly profit missed market expectations due to charges in its defense business.
Labor shortage and supply-chain pressures also forced Montreal-based CAE to cut its annual outlook for adjusted operating income growth to mid-20% from mid-30%.
U.S. aerospace companies including Boeing Co have struggled with their defense businesses, partly due to fixed-price contracts, even as their commercial aviation units benefit from a rebound in travel demand following a pandemic-induced slump.
CAE, which produces full flight simulators for planes manufactured by Boeing and rival Airbus SE, sees strong demand for training due to a global need for pilots.
The impact of labor and parts shortages was “worse than we thought,” Chief Executive Marc Parent told analysts, but added that the company is now seeing improvements on staffing.
A shortage of chips has been especially acute in the company’s smaller healthcare business, although CAE is managing the problem, Parent said. He said parts delays are affecting schedules, prompting the company to pay charges for expediting items, and working overtime.
“Lead times for parts have extended, in some cases literally more than doubled,” Parent said. “It’s not only an issue of the impact of the parts themselves not being there at the time that we need them. That’s wrecked havoc to schedules.”
CAE said its operating profit fell mainly from unfavorable contract profit adjustments of C$28.9 million ($22.62 million) related to a L3Harris Technologies’ Military Training classified U.S. program and a CAE U.S. program
“It did come as a surprise,” Parent said of the programs.
Parent said CAE was first made aware of the problems in late June.
CAE posted first-quarter earnings per share without government aid of 6 cents, missing the average analyst estimate of 23 cents. Quarterly revenue of C$933.3 million was also below a forecast of C$936.4 million.
($1 = 1.2779 Canadian dollars)
(Reporting by Allison Lampert in Montreal and Kannaki Deka in Bengaluru; Editing by Arun Koyyur and Deepa Babington)
Source: One America News Network
