CAE’s revenue of $1.3 billion was also slightly lower than analysts’ estimates in the fiscal third quarter ended March 31. Photo by Christinne Muschi/BloombergArticle contentShares of CAE Inc. slipped the most in over three years after the flight simulator firm unveiled a plan to increase operating income by 30 per cent or more by 2030 under a strategy that includes a greater focus on defence clients.Sign In or Create an Accountor View more offersArticle contentThe Montreal-based company is targeting as much as $1 billion in
adjusted operating profit by that year, compared with $700 million to $750 million currently, chief executive Matthew Bromberg said in an interview Thursday.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle content“Organic growth will drive roughly half of it. The other half can be driven by the transformation activities,” he said.
The transformation strategy is expected to generate between $125 million and $150 million in annual run-rate savings.Article contentTop StoriesGet the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don’t see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentInvestors were
not convinced. CAE’s stock price dropped as much as 13 per cent in Toronto Friday — the most since August 2022. It then pared those losses slightly, trading down 12 per cent to $32.30 as of 12:19 p.m.Article content“The longer-term outlook surprised, skewing more conservative and largely hinging on run-rate cost savings with more limited contribution from organic growth,” Bank of Montreal analyst Fadi Chamoun wrote in a client note.Article contentCAE’s revenue of $1.3 billion was also slightly lower than analysts’ estimates in the fiscal
third quarter ended March 31. Adjusted earnings per share of 42 cents were in line with forecasts in a Bloomberg survey, but down 11 per cent from the same period last year.Article contentArticle contentThe quarter was impacted by disruptions caused by the Middle East conflict, which is affecting bookings and sales.Article contentIn fiscal 2027, CAE expects revenue to increase by a low-single digit rate, with the civil aviation to be flat to slightly down while defence could grow by mid-single digits.Article contentArticle contentCEO Bromberg, who
joined CAE from Northrop Grumman Corp., was appointed in August. Browning West LP, an influential shareholder, said about a year ago that it expects the company can double its profits over three to four years.Article contentRead More Canada’s MDA Space pushing for more global defence, aerospace contracts in sovereign-dominated industries Flight training firm CAE cuts jobs ahead of May business update Advertisement 1Story continues belowThis advertisement has not loaded yet, but your article continues below.Article contentUnder Bromberg, CAE announced a two per cent cut of
its global workforce and the phase-out of some commercial airline simulators to cut costs. Last week, it said it was exploring all options, including a sale, for its aviation operations software Flightscape — the largest non-core business.Article contentThe company is also planning investments to improve manufacturing productivity and potential acquisitions in core markets or share buybacks.Article content“Our performance has been sporadic or spotty, and we want to be more consistent,” Bromberg said in the interview. “We want to grow our top line, we want to
grow our margins, and we want to improve free cash flow.”Article contentMacroeconomic uncertainty and reduced aircraft deliveries due to supply-chain constraints have pressured the global aviation industry, leading to lower pilot hiring — weighing on CAE’s civil aviation business. In the meantime, geopolitical instability and NATO allies’ long-term commitment to spend five per cent of their gross domestic product on defence and security are unlocking opportunities for the company’s defence business, beyond the cockpit.Article content“We’re exiting certain lines of business, or deemphasizing, as we try
to go to higher-margin contracts,” Bromberg said. “We have a tremendous market opening up on us.”Article contentThe defence unit represents about 45 per cent of CAE’s revenues, but it now has the potential to grow faster than civil aviation, he added, with the firm considering a push into training and simulation for airborne surveillance, submarines and land vehicles.Article contentArticle contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article content
CAE, defence, civil aviation, profit forecast, cost cutting, workforce cuts, Flightscape, operating income, adjusted operating profit
So they’re cutting stuff to make more profit? Sounds like the usual.
Defense clients?? I don’t know why everyone’s excited about that. If they’re “sharp cuts” like the title says, that probably means layoffs right?
Wait I thought CAE makes airplane parts or whatever, but it’s flight simulators. Still, if the stock dropped 13% because investors weren’t convinced, maybe this whole plan is just marketing.
Matthew Bromberg said 30% operating income by 2030 which sounds like forever. But the “transformation activities” and $125M-$150M savings yearly… where is that coming from? Like are they cutting maintenance, cutting training contracts, or cutting the people who run the simulators? Seems kinda risky to bank on defense when airlines are already shaky.