Alstom Quarterly Sales Rise 8% on Train Demand From Europe

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Alstom SA, the French company selling its energy-equipment businesses to General Electric Co., reported sales growth at its remaining train and rail-signaling business that beat analyst estimates amid demand from France and Germany.

Revenue rose 8 percent to 1.6 billion euros ($1.7 billion) in the three months through June, Alstom, based in Levallois-Perret near Paris, said in a statement Monday. The average estimate of analysts in a Bloomberg survey was for 1.53 billion euros. Quarterly orders fell 59 percent to 1.96 billion euros from a year earlier, when it booked a record 4-billion euro contract in South Africa.

“Orders nevertheless remain at a healthy level,” said Gael de Bray, an analyst at Societe Generale, in a research note. Societe Generale had estimated 1.23 billion euros of contracts for the quarter.

Alstom agreed last year to sell its energy units to GE in a

12.4 billion-euro deal, saying it lacked the critical size to survive slowing demand for power plants in Europe and rising competition. GE said on July 17 that it has offered concessions to the European Union in a bid to allay concern that the deal would squelch competition.

Buyback Plan

“The process for competition and regulatory authorisations is ongoing and we are actively working to complete it,” Alstom Chief Executive Officer Patrick Kron said in the statement. “After closing, we plan to call a shareholders’ meeting to vote on the amount of cash proceeds to be distributed to shareholders.”

Alstom plans to use the proceeds of the sale to expand its rail division, create energy ventures with GE and buy back debt as well as 3.5 billion euros to 4 billion euros of its shares.

The cash return to shareholders may be at the low end of the range, according to Societe Generale’s de Bray, who predicts the buyback may be at 35 euros for each share.

Alstom shares are little changed this year to 26.79 euros.

The company today reiterated its medium-term prediction for sales growing at more than 5 percent per year “organically,” with the operating margin gradually improving within a range of 5 percent to 7 percent.

In the fiscal first quarter, organic revenue grew 3 percent. Europe accounted for 61 percent of sales in the period, down from 73 percent a year earlier, while the proportion of revenue grew in all other regions.

“Sales deliveries were mainly driven by regional and suburban trains in France, regional trains in Italy and Germany, as well as maintenance of high speed trains in the U.K.,” Alstom said. “The first quarter showed a sound level of transport orders, fuelled by small to mid-sized contracts.”

Main commercial successes for this quarter included maintenance of Kazakh locomotives, locomotives in Azerbaijan and signalling system in Hong-Kong, Alstom said.

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