Shares of Alstom SA were losing more than 19 percent in the morning trading in Paris after the French rolling stock maker reported Wednesday negative cash flow and weak orders in its first half, despite reporting a small profit, compared to prior year’s loss. Going ahead, the company projects higher margin and organic sales in its fiscal 2024 and confirmed its mid-term objectives.
Further, Alstom initiated a commercial and operational efficiency, costs saving plan to reduce its leverage after negative cash flow. The company announced around 1,500 job cuts, scrapped dividend and plans to sell certain assets, with a view to cut short its debt burden. The firm is targeting a reduction in its net debt position by 2 billion euros by March 2025.
The free cash flow was negative 1.12 billion euros for the first half, as compared to negative 45 million euros during the same period last year.
Henri Poupart-Lafarge, Chairman and Chief Executive Officer, said, “The negative free cash flow of Alstom during this first half is a clear call for change. While demand remains sustained, despite some volatility, our commercial performance has been soft. The Bombardier Transportation integration continues to progress. However, the delivery of Aventra program has been more complex than anticipated. .. We are undertaking a comprehensive action plan to maintain our investment grade rating and secure our mid-term objectives.”
Regarding its cost efficiency plan, the company said it aims at accelerating the third phase of the Bombardier Transportation merger roadmap.
Alstom would continue growing the margin in backlog through quality order intake, expecting 0.5 percent increase per year in coming three years.
The firm plans efficiency and working capital discipline, notably through reduction of inventory days of sales and contract assets reduction through improved execution.
The planned around 1,500 job cuts to reduce overhead costs represents close to 10 percent of total S&A positions.
Depending on market conditions, Alstom is considering a range of transactions to accelerate the company’s deleveraging, including an assets disposal program, which has already been launched, generating proceeds of 0.5 billion euros to 1.0 billion euros.
The company also plans equity and equity-like issuances, including the refinancing of certain assets; as well as a capital increase with pre-emptive rights for shareholders.
Further, the Board will propose to the Shareholders’ General Assembly in July 2024 that no dividend will be paid for fiscal year 2024.
At the next Shareholders’ General Meeting, the Board will also propose Philippe Petitcolin, former CEO of Safran, to be elected as a Board Member, then Chairman of the Board.
With this, the role of Chairman and CEO will then be dissociated, and Henri Poupart-Lafarge will keep the CEO role.
Looking ahead for fiscal 2024, the company projects organic sales growth of above 5 percent, and aEBIT margin around 6 percent, compared to last year’s margin of 5.2 percent.
The company also confirmed its mid-term objectives to be reached in fiscal 2026. Alstom is aiming at sales Compound Annual Growth Rate over 5 percent supported by strong market momentum and 90.1 billion euros backlog as of September 30. This would help secure sales of around 38 billion euros to 40 billion euros over the next three years.
The adjusted EBIT margin is projected to reach between 8 percent and 10 percent from 2026 onwards.
In its first half, net profit (Group share) was 1 million euros, compared to last year’s loss of 21 million euros.
Adjusted net profit amounted to 174 million euros, compared to 179 million euros in the same period last fiscal year.
Alstom’s adjusted EBIT was 438 million euros, equivalent to a 5.2 percent aEBIT margin, compared to prior year’s 397 million euros, or margin of 4.9 percent.
The Group sales reached 8.44 billion euros, up 5 percent from prior year’s 8.05 billion euros. Organic sales growth was 8.8 percent.
Alstom booked 8.45 billion of orders in the period, down 16 percent from last year’s 10.07 billion euros. Organically, orders declined 14 percent. The decrease was mostly driven by last year’s landmark contract awarded by Landesanstalt Schienenfahrzeuge Baden Württemberg network in Germany.
Meanwhile, the company recorded commercial success across multiple geographies, notably in Europe, Asia/Pacific and in Americas, and product lines.
In Paris, Alstom shares were trading at 11.46 euros, down 19.12 percent.
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