Alstom highlighted the reasons for the decline in free cash flow for the first half of the financial year, and predicted a lower figure for the full year.
Shares of French train maker Alstom fell more than 35% after the company missed its forecast for free cash flow. At the time of writing, Alstom shares are selling for €13.76, which is 35.88% lower than its previous closing price of €21.46.
Alstom published Press release Contains preliminary financial information for the first half of the financial year 2023/24. The company’s free cash flow for the first half ending September 30 declined from negative €45 million last year to the current level of negative €1.15 billion. Alstom again said it expects full year free cash flow to be in the range of €500 – €750 million. This is a disappointing forecast for the company, as its previous forecast had cash flow “significantly positive”. The fall resulted in the temporary suspension of Alstom’s shares on the Paris Stock Exchange.
Alstom explains free cash flow reduction
Alstom’s press release offered some explanation for the decline in free cash flow. First, the company noted that its backlog, now €87 billion, has increased over the past two years, and that production has increased. In addition to frustrating supply chain conditions, the backlog caused Alstom to increase inventory 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, were factors that impacted free cash flow.
Chairman and CEO Henri Poupart-Lafarge said:
“Supported by positive market momentum, Alstom is accelerating its organic growth path. We are particularly engaged in rapidly increasing rolling stock activity. This, coupled with legacy projects being finalized at the same time, is impacting free cash flow in this first half.
Alstom’s press release also highlighted a decrease in orders from €10.1 billion in the first half of the last financial year to the current €8.4 billion. Sales were better as the company recorded €8.3 billion for the first time, up from €8.0 billion in the same period last fiscal year. Additionally, Alstom said profitability is high, as the company’s adjusted EBIT margin is 5.2%, up from 4.9% 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 enter commercial service in Valcamonica from late 2024 to early 2025. Both companies signed a contract worth €160 million agreement Six hydrogen fuel cell trains will be produced for Italy in 2020. 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.
Michele Vialle, general manager of Alstom Italy, described the announcement of the first locomotive as beneficial for the railway industry. Viall 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 transport solutions “
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