(Paris) All action at Alstom: the railway manufacturer announced on Wednesday a plan to reduce debt with the elimination of 1,500 jobs worldwide, asset sales and even a possible capital increase “depending on the conditions of the walk “.
“We are implementing a global action plan”, in particular to reassure the rating agencies and meet “our medium-term objectives”, warned the group’s CEO, Henri Poupart-Lafarge, quoted in the results press release.
Around midday, Alstom shares had fallen by almost 19% on the Paris Stock Exchange. Since the start of the year, the company’s value has been halved, illustrating investor skepticism.
On October 12, Moody’s lowered Alstom’s rating, bringing the company even closer to speculative category. These half-year results darken the picture and constitute a “major” warning, according to the consulting firm Oddo BHF, which highlights the threat of further deterioration.
At the beginning of October, the railway manufacturer revealed excessive cash consumption with the announcement of a largely negative free cash flow expected for the 2023-2024 annual financial year, of the order of -500 to -750 millions of euros.
In the first half of its staggered 2023-2024 financial year, this indicator, central to estimating the value of a company, stands at -1.1 billion euros. The growth of the activity “generated needs in terms of stock, inventory which generated significant cash needs. They were not financed by cash inflows to the extent that we would have liked,” explained the group’s CEO Henri Poupart-Lafarge during a press conference on Wednesday.
PHOTO FRANCOIS LO PRESTI, AGENCE FRANCE-PRESSE ARCHIVES
Henri Poupart-Lafarge
The commercial performance of Alstom, whose orders fell by 16% in the first half compared to last year to stand at 8.4 billion euros, was “weak”, he insisted . The revenues linked to the deposits paid upon signing the contracts were therefore disappointing.
Other older contracts are weighing down the railway manufacturer’s balance sheet, such as the Aventra program, 443 trains intended for the United Kingdom and inherited from the Bombardier Transport portfolio purchased at the start of 2021, and which has fallen considerably behind schedule.
The digestion of this acquisition, carried out two and a half years ago for 5.3 billion euros, is likely to last another year and a half according to Mr. Poupart-Lafarge’s forecasts.
Asset disposals
The group’s turnover stood at 8.4 billion euros over the half-year, a slight increase of 4.9% compared to last year, and the group’s share of net profit was just barely returned to the green, at 1 million euros – compared to a net loss of 21 million euros a year earlier.
The plan presented by Alstom to get back into working order aims to reduce the debt by 2 billion euros by March 2025. Currently, it stands at 3.4 billion euros.
To achieve this, the group, which manufactures trains and trams, is planning asset sales of around 500 million to 1 billion euros, but also a possible capital increase.
The 1,500 jobs cut to reduce costs will only be in commercial and administrative functions and represent 10% of their workforce.
The world’s second largest railway group also intends to position itself on more profitable calls for tenders, particularly in the field of services, to favor quality order intake where the potential margin is greater.
Change of president
The restructuring promises to be profound since the top of the group will also be affected. It was decided to separate the functions of general manager from that of chairman of the board of directors from July 2024.
Henri Poupart-Lafarge, CEO since February 2016 and reappointed to this position last July, will therefore only be its general director. To replace him as president, the former general director of Safran Philippe Petitcolin was chosen.
Mr. Poupart-Lafarge refused to speak of “put under supervision” and welcomed this appointment as “a very good idea”. “We have a board of directors on which there are not many large industrialists. He has this experience. (Safran) is also a project activity, so he knew what long-term projects are,” underlined the current CEO.
Alstom has already announced its intention not to pay any dividend next summer.