The Montreal-based company announced Wednesday that it is trimming about four per cent of its global workforce of 8,000.
The locations of the reductions weren't identified, but CAE said most of those affected have already been notified. It has approximately 325 employees in Ottawa, according to Ottawa Technology magazine.
CAE (TSX:CAE) said its pipeline of defence opportunities remains large as orders accelerate from high-growth regions like Asia and the Middle East.
However, European governments are cutting their military budgets resulting in lower business activity.
"We are taking measures to refocus our resources and capabilities in response to this change in the defence market," the company said in a news release.
It will record a restructuring expense of about $25 million in the first half of fiscal 2013.
The company also announced Wednesday that Gene Colabatistto has been appointed to be group president of military simulation products, training and services. He replaces Martin Gagne who has decided to retire.
Overall, CAE's fourth-quarter profit rose to $53.2 million as it got higher revenue from its core civil and military operations as well as its new business segments.
The profit amounted to 21 cents per share, up from $45.5 million or 18 cents per share a year earlier.
Revenue was $506.7 million, nine per cent higher than $465.6 million a year earlier.
CAE was expected to earn 19 cents per share on $508 million of revenues in the fourth quarter, according to analysts polled by Thomson Reuters.
For the full year, it earned $180 million or 70 cents per share, compared with $160.3 million or 62 cents a year earlier. Excluding one-time items, adjusted profits were $183 million or 71 cents per share.
Revenues increased 12 per cent to $1.82 billion, up from $1.63 billion in fiscal 2011.
Chief executive Marc Parent said the company achieved "a solid performance" in the fourth quarter and full year, laying the foundation for future growth.
"We had strong revenue growth and margins in our civil business with record orders, and despite the challenges in defence, our military business finished the year with solid order intake, continued revenue growth and good operating margins," he stated.
"In new core markets, we are on track to creating a sizable and profitable business beyond our core."
CAE's civil business, which manufactures and sells flight simulators used to train commercial pilots and provides training at centres around the world, generated $215.4 million of revenue, up nine per cent from a year earlier.
The military segment, which also provides training equipment and services to governments around the world, contributed $267.1 million of revenue _ up four per cent from a year earlier.
The combined military segment order backlog increased to $2.19 billion, including a record level of U.S. defence contracts.
CAE's relatively new mining and healthcare segments contributed a total of $24.2 million in revenue for the quarter, up from $11.1 million last year.
The company's stock declined 16 cents to $10.15 on the Toronto Stock Exchange after markets opened.