Alstom, the French train maker, has announced a series of measures as part of its cost-savings plan to reduce debt and enhance profitability. The company plans to cut approximately 1,500 jobs and eliminate its dividend. In addition, Alstom is exploring various options, including equity and equity-like issuances, as well as a potential capital increase, to expedite its debt-reduction strategy. These actions mark Alstom's latest efforts to meet its mid-term profit and cash-generation targets, which were set after its merger with Canadian competitor Bombardier Transportation in January 2021.
Challenging Targets and Cash Flow Concerns
Initially, Alstom projected the attainment of its targets by fiscal year 2025. However, the company recently revised this timeline and now expects to achieve its goals by fiscal year 2026. Moreover, delays in a U.K. contract resulted in significant cash flow issues during the six months leading up to September, raising doubts about the company's ability to realize its ambitions.
Governance Overhaul to Enhance Accountability
In an attempt to improve accountability and financial discipline, Alstom also intends to revamp its governance structure. One proposed change is the appointment of former Safran Chief Executive Philippe Petitcolin as a director, followed by his elevation to chairman. By separating the roles of chairman and CEO, Alstom aims to strengthen its governance practices. Henri Poupart-Lafarge will continue serving as the CEO.
These measures demonstrate Alstom's commitment to addressing its debt burden while striving for long-term profitability.
Alstom Aims for €2 Billion Debt Reduction by 2025
Alstom, the multinational rail transport company, has announced its target of reducing its net debt by €2 billion ($2.18 billion) by March 2025. To achieve this goal, the company is exploring various strategies, including an asset-sale plan that has already been initiated, with a target of up to €1 billion in proceeds. Additionally, Alstom is considering equity issues and a capital increase.
In light of these efforts, the board will propose to shareholders that no dividend be paid for fiscal 2024. While this decision may disappoint some investors, it aligns with the company's commitment to debt reduction.
As part of its cost-reduction plan, Alstom expects the equivalent of 1,500 full-time positions to be impacted. Notably, as of March 2023, Alstom employed over 80,000 people, according to its annual report.
On a positive note, Alstom reported a net profit of €1 million for the first half of fiscal 2024, a significant improvement compared to the €21 million loss during the same period last year. Sales also experienced growth, with an increase from €8.05 billion to €8.44 billion.
These figures were in line with preliminary expectations released by the company, which had estimated first-half sales to be around €8.3 billion. First-half orders stood at €8.45 billion, and the adjusted earnings before interest and taxes margin reached 5.2%.
Looking ahead, Alstom reaffirmed its outlook for the fiscal year ending in March and expressed confidence in achieving its mid-term targets by fiscal 2026.
Currently, shares of Alstom have declined by 10% to €12.80 as of 0808 GMT.
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