Chief financial officer
She highlighted eight legacy contracts — under which the firm must pay for expense overruns itself — dating back to before the COVID-19 pandemic "with little to no provision for cost escalation."
"These contracts are only a small fraction of the current business, but have disproportionately impacted overall defence (segment) profitability," Branco told analysts on a conference call Wednesday.
CEO
In response to the results, shares in the company dropped by
However, narrower profits in CAE's defence business as well as its civil aviation division did not put the brakes on bookings, particularly for civil, which accounts for three-quarters of operating income.
Parent said the civil segment racked up orders for 20 full-flight simulators, new training partnerships with
Overall, the company booked nearly
"I see no softening of demand," he said, pointing to rising use of its 50-plus training centres, which dot the globe from
"I can look out my window here in the parking lot in
Post-pandemic demand for air travel continues to rebound and a wave of retiring pilots lies just over the horizon, both of which spell business opportunities for CAE, said analyst
Meanwhile, escalating military activity and international tensions may increase the need for its services, from training to flight simulation.
"There's no shortage of geopolitical issues right now," Windau said, pointing to an expanding "combat environment that they can get involved in and help grow their training business."
The rising cost of the legacy fixed-price defence contracts remains a burden — and something of a surprise.
“Most investors felt that that was in the rearview mirror, but obviously it’s cropped up again," Windau said.
“We thought the quarter was disappointing."
In one example of fixed-price frustrations, he said more
Parent said he might opt to break off a contract or two, despite the cost of walking away early.
"Better to take that pain now than take a lot more later," he said. "We're looking at this in at least one specific contract."
The decision will hinge on negotiations now underway with the customer, the chief executive added.
CAE said Wednesday it earned net income attributable to equity holders of
On an adjusted basis, it reported earnings of
Analysts on average had expected an adjusted profit of
Revenue totalled
This report by The Canadian Press was first published
Companies in this story: (TSX:CAE)
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