MONTREAL — CAE Inc. reined in its earnings forecast for the year after reporting a 96 per cent year-over-year profit decrease last quarter due to supply chain problems and writedowns on a pair of pricey defence projects.
The Montreal-based builder of flight and health simulators lowered its outlook for operating income growth to the mid-20 per cent range from the mid-30s, having eked out $1.7 million in net income attributable to equity holders in the quarter ended June 30.
“We had a mixed performance in the first quarter, with civil delivering results in line with our view of strong annual growth and increased market share momentum. Defence results were disappointing, however, coming in very well short of our expectations," CEO Marc Parent told investors on a conference call.
Two charges totalling $28.9 million resulted from cost reassessments on two U.S. military training contracts, one of which saw major delays by CAE, Parent said.
“I'm confident that there's no more negative surprises like this one in our backlog," he said.
The company has been grappling with labour constraints across all three of its segments, but staff shortages in its defence wing in particular meant fewer billable hours and less efficient work, he said.
"Supply chain challenges were also more severe than anticipated, which pressured schedules. We also experienced delays on a few key orders we were expecting to commence work on in the quarter."
However, the company tacked on $1.05 billion more in orders for a record $10-billion backlog and a book-to-sales ratio — the ratio of orders received to units shipped and sold — of 1.12.
The global shortage of semiconductors has weighed on CAE's three divisions, particularly its health-care business, Parent said.
"Overall we've managed it pretty well," he qualified, adding that the shortages are not limited to chips, with delivery times more than doubled for some parts.
"Obviously that wreaks havoc to schedules. So in order for us to maintain schedules we have to do all kinds of things like, for example, paying expedite charges for parts, we have to conduct overtime, we have to conduct out-of-sequence work, which introduces all kinds of inefficiencies."
On Wednesday, CAE reported that revenue jumped 24 per cent to $933.3 million last quarter from $752.7 million in the same three months last year.
On an adjusted basis, earnings fell 68 per cent to six cents per share from 19 cents per share. The plunge was far below analysts' expectations of 23 cents per share, according to financial data firm Refinitiv.
Net income attributable to equity holders in the quarter ended June 30 totalled $1.7 million, versus $46.4 million a year earlier.
This report by The Canadian Press was first published Aug. 10, 2022.
Companies in this story: (TSX:CAE)
Christopher Reynolds, The Canadian Press