Globe and MailCuts help CAE land in the black
Flight simulator maker eyeing expansion
BRENT JANG
TRANSPORTATION REPORTER
Flight simulator maker CAE Inc. says it's heartened by its profit during a year of corporate restructuring, and now it's ready to turn its attention to emerging markets in China and India.
The Montreal-based company reversed course for the year ended March 31, posting a $64.9-million profit, compared with a $199.9-million loss in the previous fiscal year.
"We have accomplished a lot in a short period of time," CAE chief executive officer Robert Brown said yesterday.
CAE, which builds flight simulators and also trains pilots, streamlined operations last year, including cutting 450 jobs or 8 per cent of its global work force. One of the highlights of CAE's comeback was the reduction of net debt to $190-million from $286-million.
With its "transition year" behind it, the company is looking forward to raising revenue by expanding its product lines and wading deeper into promising aviation markets, Mr. Brown said.
Nick Leontidis, a CAE executive vice-president on the civil aviation side, will lead an "innovation" program that will look for novel ways to apply CAE's technology, perhaps with U.S. Homeland Security and medical imaging.
That initiative will complement Project Phoenix, a joint venture where CAE is conducting research from its Montreal laboratories in concert with partners such as École Polytechnique in Montreal, Carleton University in Ottawa and the National Research Council.
Mr. Brown said the innovation program and Project Phoenix are crucial parts of the company's restructuring efforts. Ottawa is kicking in 30 per cent of the $630-million in funding for Project Phoenix, but CAE has agreed to a repayment schedule through royalties.
CAE wants to bolster its business in China and India, where it plans to not only sell flight simulators, but package its products and services to include training for pilots.
Mr. Brown envisages a recovery in the U.S. airline industry, and forecasts that demand for new simulators will pick up as carriers buy new fuel-efficient planes.
The business jet market is showing strength, and aircraft manufacturers have had success in selling planes in Asia and the Middle East, which in turn has lifted CAE's sales, he added.
The firm's fourth-quarter profit was in line was analysts' expectations. Ted Larkin, an analyst with Orion Securities Inc., said the civil flight simulation products division is on a roll, but he noted that the military training and services unit didn't fare as well as expected.
CAE shares slipped 46 cents to $9.20 yesterday on the Toronto Stock Exchange.
In mid-2001, CAE shares set a record high of $15.45, but fell below $3 in the spring of 2003, battered by slumping demand for its simulators and training services after the Sept. 11, 2001, terrorist attacks on the United States.
CAE Inc.
Q4 2006 2005
Profit $9.4-million $108.8-million
EPS 4¢ 44¢
Revenue $284-million $263-million
Yearly
Profit/Loss $64.9-million -$199.9-million
EPS 26¢ -81¢
Revenue $1.1-billion $986-million