Red pencil and sales
Alstom is fighting for liquidity – investors are wincing
November 15, 2023, 11:05 a.m
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The TGV manufacturer Alstom is devoting all its energy to its mountain of debt. This is expected to fall significantly over the next two years. To do this, the company is cutting its workforce and looking for new sources of income. This doesn’t go down well on the stock market.
The railway technician Alstom is stepping on the brakes. In view of high debts, the group is cutting 1,500 jobs and the dividend. The French train manufacturer announced that further steps are being examined, including the sale of assets, the issuance of shares and equity-related securities and a capital increase. The moves are causing horror on the market – things are going downhill for the already battered stock. Since the beginning of the year, the shares have lost around 38 percent.
The measures are intended to help the TGV maker achieve the medium-term profit and cash generation targets that the group has set following its merger with Canadian rival Bombardier Transportation, which was completed in January 2021. In May, Alstom announced that the goals would be achieved a year later than previously planned, namely in the 2025/26 financial year. And in October, Alstom scrapped its full-year cash flow forecast due to delays on a UK order, raising doubts about its ambitions. “Alstom’s negative free cash flow in the first half of the year is a clear signal for change,” explained CEO Henri Poupart-Lafarge.
Corporate management is being reorganized
Alstom also wants to transform corporate governance to improve accountability and financial discipline. The board of directors plans to propose former Safran boss Philippe Petitcolin as director and later as chairman. This would separate the position of chairman from that of CEO. Poupart-Lafarge will retain the position of CEO.
Alstom wants to reduce net debt by 2 billion euros from 3.4 billion euros by March 2025. A plan to sell assets that has already been initiated could raise up to one billion euros. The board will propose to shareholders not to pay a dividend for the 2024 financial year, Alstom said. As of March 2023, Alstom employed more than 80,000 people, according to its annual report.
Meanwhile, the group returned to the black in the first half of the 2023/24 financial year and earned one million euros. In the previous year there was a loss of 21 million euros. Sales rose from just under 8.1 billion to more than 8.4 billion euros. Incoming orders amounted to a good 8.5 billion euros and the adjusted return on sales before interest and taxes was 5.2 percent. Both corresponded to the preliminary figures. Alstom confirms its outlook for the financial year ending in March.