Alstom's order book has never been so full. The demand from rich and emerging countries is unprecedented because trains are expected to contribute to the decarbonization of transport in the context of continued mobility and urbanization growth. The world's second-largest rail construction company behind China's CRRC is nevertheless going through a serious cash crisis and struggling to fulfill its contracts on time, particularly those it took over when it acquired its Canadian competitor Bombardier Transportation in 2021.

On Wednesday, November 15, the Group announced net income of just €1 million for the first half of its new financial year (April 2023 to March 2024). Management has announced two major changes. First, at the close of the Annual General Meeting in July 2024, former Safran CEO Philippe Petitcolin will become Chairman and current CEO Henri Poupart-Lafarge will become Managing Director. The second change is a cost-cutting strategy to turn around the balance sheet that will see the elimination of 1,500 full-time equivalent jobs "or 10% of sales and administrative functions."

The group is also planning asset disposals and a possible capital increase "with pre-emptive rights for shareholders." Analysts at J.P. Morgan recently estimated that Alstom would need to raise at least €1 billion within 12 months. The objectives are to reduce the current debt of €3.4 billion by €2 billion by March 2025 and to avoid a classification of the company as "speculative" by the rating agencies. Alstom has stated that "the reference shareholders [Caisse des dépôts du Québec and Bpifrance] support this plan."

Delivery delays

The rail market remains buoyant. Sales amounted to €8.4 billion in the first half of the year, with over 90 billion on the order book. This provides "strong visibility on future sales," the company pointed out. But the immediate problem is Alstom's inability to generate cash from its business, which Poupart-Lafarge has said amounts to "a clear call for change." From – 1.1 billion in the first half of the year, "free cash flow" should be reduced to a range of – 500 to – 750 million over the full year, according to management.

The company has said that half of the cash flow difficulties are attributable to the increased pace of train and metro construction, with the dedication of considerable resources to increase production, buy supplies and build up inventories to avoid supply shortages. The delayed delivery of 443 Aventra railcars in the UK, one of the legacies of the Bombardier Transportation takeover, is also weighing on the balance sheet. Finally, the Group has identified €8 billion worth of "non-performing" contracts, out of the €30 billion in the order book taken over from Bombardier.

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