February 11, 2009 / 1:47 PM / in 9 years

UPDATE 2-CAE profit beats estimates, sees tougher times

*Earnings jump 35 percent, beat estimates

*Revenue climbs 23 percent to C$424.6 million

*Says civil aviation market "will be more difficult" (Adds details, stock price. Changes dateline, previous TORONTO)

By Susan Taylor

OTTAWA, Feb 11 (Reuters) - Flight simulator maker and training company CAE Inc (CAE.TO) CGT.N reported a better than expected quarterly profit on Wednesday, lifted by a big jump in contracts and gains from a lower Canadian dollar, but it cautioned that the year ahead may be tougher.

A global recession is dampening demand for civil aviation, particularly in sectors related to new aircraft deliveries, Chief Executive Robert Brown said. CAE must adapt to these market changes so that it can profit from an eventual recovery, he said.

"The year ahead will be more difficult for civil aviation," Brown said in a statement. "Our outlook for CAE's role in the defense markets continues to be positive. Overall, we believe that our actions and our diversification will help us as we go through the next period."

Montreal-based CAE said third-quarter profit rose nearly 35 percent to C$53.3 million ($42.6 million), or 21 Canadian cents a share, from $39.5 million, or 16 Canadian cents a share, a year earlier.

That bettered the average estimate of analysts for a profit of 18 Canadian cents a share, before exceptions, according to Reuters Estimates.

Shares in CAE jumped 3.3 percent on Wednesday on the Toronto Stock Exchange to C$7.54 and gained 6.3 percent to $6.09 in New York.

Revenue rose 23 percent to C$424.6 million.

During the quarter, CAE sold 11 full-flight simulators, for a year-to-date total of 31, which edges the company closer to its forecast of 34 simulator sales for the full financial year.

The company also closed the quarter with a backlog of C$2.9 billion in orders, up from C$2.7 billion a year ago.

CAE said it won military contracts worth C$183.7 million in the quarter and signed agreements in its training and services civil aviation unit valued at about C$138.5 million.

Revenue and profit margins were strong in all segments, said Dundee Capital Markets analyst Richard Stoneman, except for the military and training services unit, which saw operating income drop from the previous quarter.

The military simulation products segment reported "exceptionally strong" results, he said in a note, with sales up 40 percent and operating income 123 percent above the year-before period.

High margins reflect increased volume, a positive foreign exchange impact, and higher use of a government cost-sharing program, Stoneman wrote.

$1=$1.24 Canadian Additional reporting by John McCrank in Toronto; editing by Peter Galloway

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