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French Train Manufacturer Alstom Shares Fall 35% Following Reduced Free Cash Flow Forecast

Shares in French train manufacturer Alstom crashed by more than 35% following a reduction in the company’s forecast for free cash flow. As of this writing, Alstom shares are selling at €13.76, a 35.88% plunge from its previous close at €21.46.

Alstom published a press release containing preliminary financial information for the first half of fiscal 2023/24. The first half ending September 30, saw the company’s free cash flow falling from negative €45 million from last year, to the current level at negative €1.15 billion. Alstom then added that it expects the full-year free cash flow to be in the range of €500 – €750 million. This is a disappointing forecast for the company considering that its previous prediction had the cash flow as “significantly positive.” The plunge resulted in a temporary suspension of Alstom shares at the Paris Stock Exchange.

Alstom Explains Free Cash Flow Reduction

Alstom’s press release offered some explanation for the plunge in free cash flow. Firstly, the company mentioned that its backlog, now €87 billion, has grown over the last two years, and caused a spike in production. The backlog, in addition to disappointing supply chain conditions, caused Alstom to increase inventories and assets to avoid production disruptions and delivery delays. Alstom also noted that delays in its Aventra program as well as a reduction in down payments, are factors that affected the free cash flow.

Chairman and Chief Executive Officer Henri Poupart-Lafarge stated:

“Supported by a positive market momentum, Alstom is accelerating on its organic growth trajectory. We are engaged in a steep ramp-up, in particular in the rolling stock activity. This, combined with legacy projects being finalized at the same time, is weighing on the free cash flow in this first half.”

The Alstom press release also highlighted a reduction in orders from €10.1 billion in the first half of the last fiscal year, to the current €8.4 billion. Sales were better as the company recorded €8.3 billion in the first one, more than the €8.0 billion from the same period in the previous fiscal year. In addition, Alstom said profitability was higher, as the company’s adjusted EBIT margin is 5.2%, over the 4.9% from last year.

Italy’s New Train

Alstom and Italian public transport company Ferrovie Nord Milano (FNM) have announced Italy’s first zero-emission train. Presented by FNM, the train will begin commercial service in Valcamonica sometime from late 2024 into early 2025. Both companies signed a €160 million contract agreement in 2020 to produce six hydrogen fuel cell trains for Italy. The new train is the first phase of the H2iseO project. The project aims to create “Italy’s first Hydrogen valley” in the province of Brescia.

Alstom Italy General Manager Michele Viale said the announcement of the first locomotive as advantageous to the railway industry. Viale described it as “a project that represents significant progress for the entire rail sector and confirms Alstom’s role in anticipating and shaping the future of mobility with new, highly sustainable transportation solutions.”

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French Train Manufacturer Alstom Shares Fall 35% Following Reduced Free Cash Flow Forecast