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Alstom pursues asset sales after warning on

cash flow
Chief executive of French train maker says company will also consider capital increase

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Henri Poupart-Lafarge, chair and chief executive of Alstom: ‘Having a strong balance sheet for me is key’ © Carmen
Jaspersen/AFP/Getty Images

Sarah White in Paris 4 HOURS AGO 11

Shares in train manufacturer Alstom lost as much as a fifth on Wednesday after

the French company said it was seeking up to €1bn in asset sales as well as
considering a capital raise after warning on its cash flow levels last month.

Henri Poupart-Lafarge, Alstom’s chief executive, told the Financial Times that
the cash warning had been a “call for change” as he outlined measures to cut
the group’s net debt by €2bn over the next year and a half, as well as job cuts to
trim costs.

The announcement comes after a cash flow warning last month spooked
investors. Alstom said it expected negative free cash flow of €500mn-€750mn
for the year to March 2024, slashing its share price by more than a third. The
group had net debt of €3.4bn at the end of September.

Known for making France’s high-speed TGV trains, Alstom is the world’s
second-biggest train manufacturer after China’s CRRC and has contracts
stretching from Australia to Saudi Arabia, with more than 80,000 employees
globally.

The company is riding high on record orders for trains and related services —
its backlog reached €90.1bn in its first half ending in September, it confirmed
in results on Wednesday — but Alstom is coming under pressure from short-
term problems, including some downpayments on deals not coming in as
rapidly as planned.

“I’ve always said to the market that our trajectory allows us not to need any
capital increase. It is fair to say that we have deviated from this trajectory . . .
and having a strong balance sheet for me is key,” Poupart-Lafarge said.

He added that Alstom was not envisaging a capital raise from investors straight
away as the company felt no pressure to do so and wanted to give asset sales a
chance.

The group was focused on preserving its investment-grade credit rating,

Poupart-Lafarge said, while top shareholders were on board with Alstom’s
latest plans. The group is also set to forgo a dividend payment for its full year.

Alstom shares were trading just above €11 around midday. While a capital
increase was not expected imminently, cutting the company’s debt levels
through asset sales prolonged “the period of uncertainty for shareholders”, said
Marc Zeck, analyst at Siftel.

The Caisse de dépôt et placement du Québec pensions fund holds 17 per cent of
Alstom, while French state-backed investment bank Bpifrance has 7.4 per cent.

The chief executive — who is set to relinquish his additional role of chair after
taking on both jobs in 2016 — said the group would increase cash generation by
tackling operational problems that tripped up Alstom.

It has struggled with problem contracts inherited from its acquisition of

Bombardier’s rail unit and had trouble keeping up with an increased pace of
production.

Alstom is also exposed to political uncertainty. UK Prime Minister Rishi Sunak

last month radically scaled back Britain’s planned High Speed 2 rail line,
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although Poupart-Lafarge said Alstom’s train orders as part of that project had
been confirmed. European companies Add to myFT

“The decision is where to run the trains, as these trains could run on Rail Add to myFT

conventional lines,” he added. Alstom SA Add to myFT

Henri Poupart-Lafarge Add to myFT

Looming job cuts at Alstom’s manufacturing plant in Derby were linked to
different train programmes now coming to an end, Poupart-Lafarge said. These Sarah White Add to myFT

are expected to reach about 550.

Part of Alstom’s recent issues have derived from its delay in producing as many
trains as planned as it increased its manufacturing, creating issues with
inventory costs.

The hangover from the €5.5bn Bombardier deal that closed in early 2021 also
persists and has weighed on Alstom’s efforts to increase its operating profit
margins. Some of Bombardier’s contracts were lossmaking.

Alstom announced 1,500 job cuts in administrative and support roles on

Wednesday as it speeds up the last phase of its Bombardier integration.

Poupart-Lafarge said the group would still “in the middle of the battle . . . have
a fully efficient organisation” after the acquisition, in line with the three to four
years of adjustments it had always expected.

Recommended “There is no silver bullet. We solved all the

individual problems on all the individual
projects that existed,” he said of the deal.

Alstom is rated one notch above junk

status by Moody’s.

News in-depth Alstom SA The company said it was aiming for

Alstom: the French train giant battling to stay
€500mn-€1bn in asset sales and would
on the rails
consider selling equity stakes in some of
its subsidiaries to other businesses. It
would also examine other forms of capital injection.

Alstom is now proposing to split the roles of chief executive and chair after
feedback from top investors before its cash flow warning, Poupart-Lafarge said.

Philippe Petitcolin, a former boss of jet engine maker Safran, will be proposed
as chair ahead of Alstom’s shareholder meeting next July.

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