Shares of trainmaker Alstom fall as cash flow splits

An Alstom logo is seen at the Alstom factory in Semeac near Tarbes, France, February 15, 2019. REUTERS/Regis Duvignau

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  • The company posts an annual EBIT of 767 million euros against 757 million consensus
  • Record order book at the end of March up 9% to 81.01 billion euros
  • Adjusted net loss for the year reaches 173 million euros on Russia impairment

May 11 (Reuters) – Shares of Alstom (ALSO.PA) fell sharply on Wednesday, erasing earlier strong gains as the French trainmaker’s comments on cash flow generation and forecasts split the market.

The stock soared 9% after the market opened, before falling almost 12%. As of 12:29 GMT, shares were down 9.8%.

“There is a very mixed opinion on Alstom’s medium-term outlook, and more particularly on the group’s ability to generate cash and strengthen the capital structure,” said William Mackie, analyst at Kepler Cheuvreux.

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French high-speed train maker TGV reported positive free cash flow of 469 million euros ($494.7 million) in the second half of its fiscal year ending March, which Credit Suisse found “very reassuring”.

However, legacy costs from the assimilation of legacy projects after the purchase of Canadian Bombardier’s rail unit (BBDb.TO) kept cash flow for the full year in the red at $992 million. euros.

“We have settled almost all of the disputes (…) and we now have a much more limited portfolio of risks,” CEO Henri Poupart-Lafarge told the press.

Alstom said it expects to record 400 million euros in cost synergies from the acquisition in the 2024-2025 financial year and 475 to 500 million per year from 2025-2026.

But Kepler’s Mackie said the company was unable to provide clear cash flow guidance for the current year.

“The market was clearly hoping for more granularity on free cash flow, including seasonality,” Jefferies wrote.

Alstom has announced its intention to offer a dividend of 0.25 euros per share which JPMorgan says should ease investor concerns about the need for a capital increase.

French financial news site BFM Business reported on Wednesday, citing sources close to the company, that Alstom was in talks with Russian oligarchs to sell its 20% stake in Moscow-based Transmashholding after taking a blow of 441 million euros as a result of the conflict in Ukraine.

“We will be opportunistic depending on events,” Poupart-Lafarge said of recent geopolitical concerns.

($1 = 0.9480 euros)

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Reporting by Juliette Portala; Editing by Milla Nissi and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

Virginia C. Taylor