The French group Alstom, number two in the world in railway construction behind the Chinese CRRC, plunged on the stock market on Thursday, October 5, following the announcement, the day before, of cash flow difficulties in the first half, which will continue in the remainder of the staggered financial year (April 2023-March 2024). The stock fell more than 38% during the day. The alert is all the more surprising given that the company had announced a cash flow “significantly positive” over the year, which fuels speculation about its financial health and the scenario of a capital increase.
At the end of a board of directors meeting on Tuesday and Wednesday under the chairmanship of its CEO, Henri Poupart-Lafarge, Alstom announced a turnover of 8.3 billion euros in the first half (+ 6. 5%). But above all it revealed that it had recorded free cash flow (“free cash flow”) negative of 1.15 billion euros in the first half; he forecasts that it will amount to between −500 million and −750 million over the entire financial year.
“We are engaged in a strong ramp-up, in particular in the rolling stock activity, which, in addition to projects inherited from the portfolio which were in the finalization phase at the same time, weighs on the free cash flow of this first semester “indicated Mr. Poupart-Lafarge to justify the deterioration of this key indicator.
Demand is indeed very strong in the rail sector (TGV, trains, metros, trams, signaling, services, etc.). To honor an order book now exceeding 87 billion euros, Alstom must accelerate the ramp-up of its factories, especially for the delivery of trains, RER and metro trains. And to avoid any disruption in supply, it builds up expensive stocks. Which requires “cash”. All this explains half of the tension on cash flow. The group assures that “improvements are expected in the second half of 2023-2024” and “these negative factors will be completely absorbed in the years to come”.
“Hard blow to credibility”
Another reason for the drying up of liquidity: the delay in finalizing the Aventra program in the United Kingdom, which is not expected before the start of the 2024-2025 fiscal year. Designed especially for the British rail network, these 443 electric multiple units ordered and partly delivered are a legacy, among other things, of the acquisition of the Canadian Bombardier Transport by Alstom in January 2021, and which still weighs heavily on the balance sheet. Finally, the group is penalized by the drop in the level of advances received from customers in the first half, compared to the same period of the previous year, due to the delay of certain programs.
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