Alstom Profit Lags Behind Estimates as GE, Siemens CircleFrancois de Beaupuy
Alstom SA canceled plans to pay a dividend and held off giving an outlook for this year with Chief Executive Officer Patrick Kron saying running the company has become more difficult as General Electric Co. and potentially Siemens AG pursue its power-equipment units.
Kron said he’s keen to wrap up the potential sale of power-grid and turbine assets in good time as keeping employees focused may become harder. Alstom booked 220 million euros ($306 million) in costs tied to restructuring and writedowns, with net income falling 28 percent to 556 million euros, missing analyst estimates for 696 million euros.
GE offered 11.4 billion euros for the operations, while Siemens is mulling a rival offer, against a backdrop of French government demands to protect jobs. Alstom has conceded it lacks the critical mass to compete with the U.S. company as well as Germany’s Siemens and emerging market players. It plans to use the proceeds to bolster its train and signaling division, pay down debt and reward shareholders.
“My goal is that the process doesn’t carry on endlessly,” Kron said on a call with reporters. “Alstom isn’t in a crisis, it doesn’t have short term problems. It has strategic problems in energy that we want to address.”
No dividend for the fiscal year will be proposed at a forthcoming shareholder meeting.
Alstom’s order intake fell 10 percent last year to 21.5 billion euros as “a number of major infrastructure projects have been postponed, notably in thermal power,” the French company said today. Organic sales advanced 4 percent to 20.3 billion euros, with operating profit ahead of estimates.
The company reported a surprise positive cash flow of 340 million euros in the second half, after initially predicting a small outflow. Net debt rose to 3 billion euros at the end of March, up from 2.34 billion euros.
“Alstom delivered a better commercial performance in the second half allowing the group to end the year with a book-to-bill ratio above 1,” Kron said in the statement. “Free cash flow has been positive in the second half, partly offsetting the significant outflow of the first half.”
GE, based in Fairfield, Connecticut, has the inside track for a deal to bolster its own power business with Alstom’s turbines, maintenance services and power-grid business, while leaving the door open for an Siemens offer. French President Francois Hollande yesterday said GE’s offer and a potential Siemens rival bid should offer more guarantees for jobs.
Alstom’s board named a committee of independent directors to study the binding offer from GE by June 2, with exclusive talks to follow if that plan wins support. The company will then seek shareholder approval for the sale in the fall, “if things progress normally,” Kron said today.