Bouygues Books $1.9 Billion Charge for Alstom Stake
Bouygues SA (EN), the French construction company, said it will book a 1.4 billion-euro ($1.9 billion) writedown on its stake in Alstom SA (ALO), which has been hurt by slowing demand for thermal-power equipment.
The expense will be booked in the fourth quarter and will have no effect on cash position or operating performance, Paris-based Bouygues said in a statement.
Bouygues holds about 29 percent of Alstom, a maker of trains and power-generation equipment. It bought an initial holding from the French government in 2006, and added to its investment to tap growing infrastructure needs and benefit from synergies with its own construction business and Alstom’s power-and rail-equipment units.
Alstom’s announcement of reduced prospects for cash flow and operating earnings last month led analysts to reduce their forecasts that are used by Bouygues to help determine the value of its investments, Bouygues said today.
The stake will now be valued at 3.08 billion euros, Bouygues said.
Bouygues fell as much as 1.6 percent to 29.77 euros in Paris, and traded down 0.8 percent at 30 euros at 9:06 a.m.
Alstom CEO Patrick Kron cut the company’s forecast for operating margin and cash flow for the second time in nine months in January as sluggish economic growth in Europe and slowing expansion in emerging markets prompted utilities to delay orders of new power plants. Orders in the first nine months of the year dropped 12 percent to 15.1 billion euros.
Kron is slashing jobs and other costs, and plans to sell as much as 2 billion euros of assets this year to reduce debt. Alstom stock has dropped 21 percent this year after shedding 12 percent in 2013.
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