The French infrastructure and transport group Alstom will cut 1,500 jobs, sell assets, suspend the dividend and is considering increasing capital to leave the current crisis behind. The measures are focused on maintaining the investment grade in its rating and reducing its debt by 2,000 million euros, as announced this Wednesday. Shares fell up to 19% after hearing the news.
The departures will be concentrated in administration and sales departments, about 10% of the personnel in those areas, without affecting engineers or factory workers. The company has production facilities in Spain, specifically in Santa Perpètua de Mogoda (Barcelona) and Trapaga (Bizkaia), and innovation and maintenance centers in Madrid. It also has a signaling systems maintenance and engineering center in León. In the country it employs about 3,100 people, details on its website.
The moves are intended to calm investors after cutting its free cash flow forecast last month in response to a rise in inventories and delays to a major project in the United Kingdom. The cut caused a massive sale of the company’s shares, which adds to the problems of the problematic acquisition of the railway business of the Canadian Bombardier for about 5,000 million euros, three years ago. Alstom is still grappling with costly legacy contracts and has blamed Bombardier’s mismanagement for delays in deliveries and the heavy spending needed to complete them, such as the portfolio of 443 trains in the UK.
As announced this Wednesday, in the first half of the fiscal year, from March to September, it has earned 1 million euros, a minimum that improves the 21 million losses of last year. Its sales increased 4.9%, to 8,443 million euros, but orders fell 16%, to 8,446 million.
The worrying thing is that free cash flow was negative 1,119 million, a treasury situation that represents “a clear call for change,” declared Henri Poupart-Lafarge, chairman of the board of directors and CEO. The manager has pointed out that although demand remains, commercial performance is weak.
The plan seeks to reduce its net debt by 2,000 million euros by March 2025. Today it is at 3,400 million. Alstom is considering a series of transactions to accelerate deleveraging, including the asset sale program already underway, with which it hopes to generate revenues of between 500 and 1 billion euros. “Alstom’s top priority is to support credit metrics and strengthen the group’s foundations to create lasting value for shareholders,” the results state.
The restructuring promises to be profound since the group’s leadership will also be affected. At the next general meeting of shareholders, in July 2024, the board will propose Philippe Petitcolin, former CEO of Safran, as a member of the board and then as chairman of the board, which will mean that Henri Poupart-Lafarge will cease to be chairman of the board and will maintain the position of CEO. The suspension of the dividend will also be discussed at the meeting.
The company is also targeting more profitable tenders to favor quality orders where the potential margin is higher.
