Aug 10 (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
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. "Its 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
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)