(Montreal) The revival of civil aviation in Europe and Asia-Pacific would be the next catalyst that will fuel the recovery for CAE, believes its president and chief executive officer, Marc Parent.
Posted at 11:52
Updated at 3:33 p.m.
The Montreal specialist in pilot training and simulators has benefited from the recovery that began in the United States, but activities are restarting more slowly in Europe and Asia-Pacific, noted Mr. Parent, during a conference call. to discuss the company’s most recent quarterly results.
Civil aviation is operating at almost half of its pre-pandemic capacity, it says. “There is still plenty of room for recovery in this market. »
This recovery will go through the relaxation of health measures.
The real brake on the desire to travel is not that people are afraid to fly. It’s that people can’t go anywhere or they have to wait in quarantine.
Marc Parent, President and CEO of CAE
In Europe, several countries have eased the health restrictions imposed on travelers in recent days. For example, Switzerland, the United Kingdom and Denmark have announced the abandonment of the screening test for vaccinated travellers. Mr. Parent sees these announcements in a positive light. “The trend is favourable,” he says.
Profit halves
The comments came as CAE posted lower earnings on Friday and the pandemic continues to disrupt business.
The Montreal company announced a net profit of 26.2 million in the third quarter, down 46% from that of 48.8 million recorded a year earlier.
For their part, revenues rose slightly, by 2%, to settle at 84.7 million for the three-month period ended December 31.
Adjusted earnings per share were 19 cents, compared to 22 cents in the same period a year earlier.
Analysts had expected earnings per share of 19 cents and revenue of 918.24 million, according to forecasts compiled by financial data firm Refinitiv.
The lower-than-expected earnings have TD Securities’ Tim James saying he has been too optimistic about the resumption of pilot training in civil aviation. He notes that the Omicron variant and the health restriction measures have had a greater impact than expected, both on the defense sector and on that of civil aviation.
To the extent that this deviation from our guidance is temporary – it should be recovered in the coming quarters – and the good margins are sustainable, we believe that investors should be encouraged by CAE’s profitability potential.
Tim James, Analyst at TD Securities
Benoit Poirier of Desjardins Capital Markets sees encouraging signs behind the difficult context, particularly in terms of margins, the order book and cash flow generation.
In the civil aviation segment, CAE managed to protect its margins, despite declining revenues. Sector revenues stood at 390.1 million, compared to 412.2 million in the same period a year earlier.
Operating margins reached 21.4%, compared to 14.2% in the same period of 2020. The company reported that the utilization rate of training centers in the civil aviation sector stood at 60%, an increase of 10 percentage points.
In the defense sector, revenues increased by 42% to 426.5 million, but the margins of the traditional activities (4.2%) still remain under pressure when compared to those of the acquisition L3 Harris (15, 3%).
On Friday, the stock fell 3.5%, or $1.13, to $31.58 on the Toronto Stock Exchange.
