Thales Transport Head Sees Growth After First Japan Order

Thales SA’s rail-signaling division, which today won its first order in Japan, is poised to improve its performance in 2014 from last year, driven by demand in the Middle East and Asian markets, its chief said.

This year will be better than 2013, which wasn’t “an exceptional year,” Jean-Pierre Forestier, head of the transport-systems division of the French maker of defense electronics, said in a phone interview.

“There are some projects I feel we can win,” Forestier said, adding that the Middle East, India, China are key regions, and that Germany’s market may resume growth in 2014.

The French company’s latest order, a contract from East Japan Railway Co. to equip Tokyo’s 30-kilometer long Joban line, is the first signaling contract won by a foreign company and will help lift earnings at Thales’s rail signaling, train control and ticketing division, which remained stagnant in 2013.

The Japanese order will cement ties with Japanese manufacturers, which are active in turnkey markets in several cities worldwide, Forestier said. Thales is tapping network upgrades and needs for transport systems in congested cities after being hit by falling mainline rail-signaling sales and some costly contracts in the first half of last year.

Thales has already worked on the Dubai metro with Mitsubishi Heavy Industries, he said.

Sales at the division amounted to 900 million euros ($1.23 billion) in the first nine months of 2013, down 2 percent on an organic basis, the company, based in Neuilly-sur-Seine near Paris, said on Oct. 24. The order intake fell 15 percent to 955 million euros from a year earlier, which were boosted by major orders in Denmark and Asia.

Chile to Hungary

Thales’s transport division, which in 2013 won contracts from China to Canada to Chile to Hungary, also got its first rail-signaling orders in South Africa and Egypt last year.

The signaling-systems industry may continue to consolidate after the recent purchase of the rail division of Invensys Plc. by Munich-based Siemens AG, Forestier said.

“This will give this group more research and development capacities, so we’ll have to be very vigilant on our performance in innovation if we don’t make an acquisition,” the Thales executive said. Thales “will look” at Italian rival Ansaldo STS SpA if it comes up for sale, he said.

Cash-strapped Finmeccanica SpA owns 36 percent of Ansaldo STS, according to data compiled by Bloomberg.

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