Alstom’s First Half of 2013/14 - Stable Profitability - FCF Impacted by
Project Profiles and Downpayments
*Ambitious cost saving programme accelerated
*Strategic mobility to be enhanced through asset sales
LEVALLOIS-PERRET, France -- November 6, 2013
Between 1 April and 30 September 2013, Alstom (Paris:ALO) booked €9.4 billion
of orders, down 22% compared to the first half of last year. The book-to-bill
ratio, close to 1, benefited from a good flow of small to medium-sized orders
despite a less active market for big contracts. Over the same period, sales
were up 4% organically, amounting to €9.7 billion, thanks to the ramp-up
achieved in the second quarter. Income from operations and the operating
margin were stable at around €700 million and 7.1% respectively. The net
profit stood at €375 million whilst the free cash flow at €(511) million was
mainly affected by the unfavourable cash profile of some contracts being
executed during the period and by limited downpayments due to the level and
mix of orders received.
30 September 30 September % change % change
(in € million) 2012 * 2013 reported organic
Orders received 12,129 9,431 (22)% (20)%
Backlog 52,015 50,890 (2)% 2%
Sales 9,748 9,730 0% 4%
Income from operations 703 695 (1)%
Operating margin 7.2% 7.1% -
Net income 386 375 (3)%
Free cash flow 101 (511) -
* Adjusted for revised IAS 19
“In markets that remain contrasted, our commercial activity in the first half
was supported by a good flow of small and medium-sized orders, but lacked
large contracts, notably in Thermal Power. As expected, sales recovered in the
second quarter leading to a 4% organic growth in the first half. With strict
cost control and good execution of contracts, the operating margin remained
stable. Tendering is active and we expect stronger order bookings by the end
of the year, which will support free cash-flow rebound in the second half.
Looking forward, we maintain the guidance given at the close of FY 2012/13. In
the current low-growth environment, we need to further reinforce our
competitiveness; we are accelerating our performance plan and expect annual
cost savings ramping up to € 1.5 billion by April 2016. We want to regain
strategic mobility and have launched an asset disposal programme targeting €1
to 2 billion of proceeds through the contemplated sale of a minority stake in
Alstom Transport and the disposal of non-strategic assets”, said Patrick Kron,
Alstom’s Chairman & Chief Executive Officer.
During the first six months of 2013/14, the macro-economic conditions have
remained challenging with a sluggish economic environment in mature countries
and a slower growth in some emerging countries.
In power generation, while demand in steam remains stable with opportunities
in Eastern Europe, Middle East and Asia, gas recovery is postponed in the
mature markets. Thermal services and environmental control systems continue to
show good dynamism. As for renewable, the hydro market improved compared to
last year and some large projects are expected to resume over the medium-term.
Onshore wind remains under significant price pressure while offshore wind
shows opportunities notably in Europe.
The power transmission market continues to benefit from sustained demand in
HVDC and smart grid while AC is still suffering from overcapacity and pricing
Finally, demand for rail transport equipment and services remains sustained,
supported by urban and regional needs in Europe and expansion in emerging
Book-to-bill ratio close to 1 thanks to a robust flow of small and mid-sized
Orders booked over the first half of 2013/14 amounted to €9.4 billion, a 22%
decrease from the same period last year, with a good flow of small to
medium-sized orders despite a less active market for large contracts, notably
in Thermal Power. On 30 September 2013, the Group’s backlog amounted to €51
billion, representing 30 months of sales.
During the semester, Thermal Power registered once again a strong level of
orders in Services, at €2.7billion, while orders for new power plants
Renewable Power orders rebounded strongly, at €1 billion, thanks to new hydro
projects (Albania, Turkey, Canada and India) and services. Several wind
contracts were signed over the first six months too (Mexico, Brazil).
Grid recorded €1.7 billion of contracts, a stable level if adjusting from the
ultra-high voltage direct current (UHVDC) contract signed last year in India.
Transport registered a sound level of orders at €2.9 billion, decreasing
compared to an exceptionally high level of contracts in H1 2012/13. Commercial
activity remained sustained with, in particular, very high-speed and intercity
trains in France, light rail overhaul in the USA and an infrastructure
contract in the UK. In October, Alstom announced two mega contracts, one of
€1.2 billion for the metro of Riyadh and one of around €4 billion for suburban
trains in South Africa.
Stable operational performance
Sales in the first half of 2013/14 amounted to €9.7 billion, up 4%
organically, with all Sectors reporting positive organic growth. The second
quarter showed a significant rebound in sales, growing 10% on a like-for-like
basis, with notably a strong growth for Thermal Power (+12%) and Transport
(+10%) while Renewable Power and Grid sales increased organically by 5% and 4%
Supported by sound project execution and on-going cost reduction, both the
income from operations, at €695 million, and the operating margin, at 7.1%,
were globally stable in the first half of 2013/14 as compared to the same
period last year. The operating margin in Thermal Power remained strong at
10.6%, benefiting mainly from good project execution and actions on costs.
Renewable Power’s operating margin was affected by continued pressure on wind
prices and decreased from 5.7% in the first half 2012/13 to 5.1%. Better
volumes and actions on costs allowed margin to improve from the low point of
H2 2012/13 (4.1%). Grid’s operating margin decreased from 6.1% in the first
half of last year to 5.7% as a result of continuing negative impact of
overcapacity and price pressure in AC, partly mitigated by overall good
execution of projects and cost optimisation.
In Transport, the operating margin increased from 5.3% in the first half
2012/13 to 5.6% thanks to tight cost control.
Net profit amounted to €375 million compared with €386 million in the first
half of 2012/13 when adjusted for revised IAS 19.
Free cash flow impacted by some project profiles and downpayments
Free cash flow amounted to €(511) million in the first half 2013/14.
Unfavourable cash profile of some contracts executed during the period and
downpayments, which were impacted by the level and mix of orders received,
weighed negatively on working capital change. Nonetheless, other components
have been kept under strict control thanks to continuous efforts on working
The Group had a gross cash in hands of €1.8 billion at the end of September
2013 and a confirmed undrawn credit line of €1.35 billion. On 1 July 2013, the
Group launched a new bond issuance of €500 million which bears an annual
coupon of 3.0% and will mature in July 2019. Gradual repayment of the debt is
scheduled to start in September 2014.
Following the payment of the dividend, the Group’s net financial debt came to
€(3,294) million at 30 September 2013 versus €(2,342) million at 31 March 2013
and €(2,871) million at 30 September 2012.
Equity was stable over the period, standing at €5,006 million at 30 September
2013 from €5,089 million at 31 March 2013 (adjusted for revised IAS 19).
A comprehensive action plan
As already stated when the 2012/13 accounts were released, demand in a number
of markets is weaker than expected 18 months ago. Economic growth has not
recovered to pre-crisis level in a number of mature countries and has slowed
in emerging countries. In this context, Alstom is enhancing its on-going plans
to improve its competitiveness and adjust cost base to this low-growth
scenario and is taking action to increase its strategic mobility.
The Performance plan, named “d2e” (dedicated to excellence), is accelerated
and enhanced with two targets: (i) reinforcing the Group’s long-term
competitiveness and (ii) consolidating the medium-term guidance. Alstom is
targeting annual savings ramping up to €1.5 billion by April 2016 as compared
to the 2012/13 cost base. In this context, the restructuring costs associated
with this plan are expected to be in the €150-200 million range per year.
To increase financial flexibility and enable strategic mobility for both
Alstom Group and Alstom Transport, the Group will study the sale of a minority
stake in Alstom Transport to industrial partners or financial investors.
Alstom also intends to dispose of non-strategic assets. Globally this
programme is targeting €1 to 2billion of proceeds by December 2014.
The Group maintains its guidance of a low-single digit sales growth on an
organic basis and of a stable operating margin in 2013/14, which should then
gradually increase to around 8% over the next two to three years. Free cash
flow should be positive year after year over this period.
The half-year financial report can be found on Alstom’s website at
This press release contains forward-looking statements which are based on
current plans and forecasts of Alstom’s management. Such forward-looking
statements are relevant to the current scope of activity and are by their
nature subject to a number of important risk and uncertainty factors (such as
those described in the documents filed by Alstom with the French AMF) that
could cause actual results to differ from the plans, objectives and
expectations expressed in such forward-looking statements. These such
forward-looking statements speak only as of the date on which they are made,
and Alstom undertakes no obligation to update or revise any of them, whether
as a result of new information, future events or otherwise.
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