CAE Moves into Profit, Shares Drop

Despite a revenue increase of 16% and a $14-million profit for the quarter ended 30 September, compared with a $5.2-million loss a year ago, CAE shares dropped 10.1% as the Montréal aviation and defence training company fell “far short” of analyst expectations.

However, National Bank analyst Cameron Doerksen said recovery on the civil aviation side is “simply a matter of time. Business aviation flying activity is now well above pre-pandemic levels and commercial airlines in most parts of the world are seeing a steady rebound in air travel demand''.

CAE reported revenue of $814.9 million for the second quarter of fiscal 2022, compared with $704.7 million in the second quarter last year. Second-quarter net income attributable to equity holders was $14.0 million ($0.04 per share) compared to a loss of $5.2 million (negative $0.02 per share) last year. Adjusted net income in the second quarter of fiscal 2022 was $53.2 million ($0.17 per share) compared to $34.2 million ($0.13 per share) last year.

“Our year-over-year growth in the second quarter was driven by the strengthening of our Civil training business, the continued ramp-up of structural cost-saving initiatives, and the integration of the L3 Harris Military Training business in our Defence results,” said Marc Parent, CAE’s President and Chief Executive Officer. The Defence and Security business “delivered solid revenue with a double-digit margin. We had lower organic performance in Defence this quarter, reflecting delays in orders and program execution, particularly internationally, largely due to the pandemic. And in Healthcare, I am encouraged by our third consecutive quarter of year-over-year revenue growth in our core.”

Simulator utilization fell to 53% of capacity due to lower demand for commercial and business pilot training, although CAE said bookings rising again. Time logged by pilots at the company's global network of training centres was particularly low in Asia and the Middle East amid renewed lockdowns in some countries.

Similarly, on the defence side, Parent noted: “For a training centre where we train international customers of the C-130 H, well, imagine, there's no customers coming. Eventually you run out of backlog that you can execute in an efficient manner.”

On CAE’s outlook, Parent added, “While Covid-related impacts continue to affect all of our business units, we increasingly see a clearer path to recovery and a larger, more resilient, and more profitable CAE in the future. We continue to play offence during this period of disruption, as evidenced by our recent announcement of the proposed acquisition of Sabre’s AirCentre business, which marks our ninth accretive acquisition since the pandemic began.”