The company said that it was looking into the reasons for the anomaly, which happened two minutes after the launch and followed the second ignition stage.
The Vega launcher took off from a space port in French Guiana and was carrying the earth observation satellite FalconEye1 of the United Arab Emirates armed forces.
Avio produced the Vega launcher and the propulsion motor Zefiro 23 which was used in the second ignition stage.
Shares in Avio fell nearly 15% in early trading and were automatically suspended. They resumed trading by mid-morning and were down 11.6% at 1025 GMT.
Airbus and Thales Alenia Space, a joint venture between Thales and Leonardo, built the satellite, according to European space group Arianespace.
Arianespace, in charge of launching the satellite, had to postpone the launch twice due to unfavourable high-altitude winds, it said on its website.
Avio said on its website it is the main contractor for Vega, a space programme sponsored by the European Space Agency for missions in low earth orbit.
(Reporting by Silvia Recchimuzzi in Gdynia. Editing by Jane Merriman)