CAE slips 14% as labor, supply shortages hurt 737 MAX simulator maker’s bottom line

Marc Parent, President and CEO of CAE Inc. speaks during a news conference in Montreal, Quebec, Canada August 8, 2018. REUTERS/Christinne Muschi

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Aug 10 (Reuters) – Shares of CAE Inc (CAE.TO) fell as much as 14% on Wednesday after the 737 MAX simulator maker’s quarterly profit missed market expectations over strains at its defense business.

Labor shortages and supply chain pressures also forced the company to cut its annual forecast for adjusted operating profit growth to the mid-20s from the mid-30s.

US aerospace companies, including Boeing Co (BA.N), are struggling with their defense businesses, in part because of fixed-fare contracts, although their commercial aviation business has benefited from a recovery in travel demand.

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CAE stated that its operating profit was primarily due to unfavorable contract profit adjustments of C$28.9 million (US$22.62 million) related to an L3Harris Technologies (LHX.N) classified US military training program and a CAE-US training program had declined.

The company posted first-quarter earnings per share excluding government subsidies of 6 cents, missing the average analyst estimate of 23 cents. Quarterly revenue of $933.3 million also fell short of expectations of $936.4 million.

US-listed CAE shares were trading lower at $22.7, while the company’s Canadian shares fell 12.7% to C428.7.

($1 = 1.2779 Canadian Dollars)

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Reporting by Kannaki Deka in Bengaluru; Edited by Arun Koyyur

Our standards: The Thomson Reuters Trust Principles.

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