Alstom First-Half Profit Increases as Focus Turns to Rail

  • Medium-term targets for revenue and margin gains maintained
  • Order book driven by small, mid-sized contracts across regions

Alstom SA, the French company that sold most of its energy assets to General Electric Co. to refocus on rail, said first-half profit gained 10 percent as the company reiterated its medium-term targets for rising revenue and margins.

Income from operations rose to 167 million euros ($182 million) in the six months through September, the company, based in Saint-Ouen near Paris, said in a statement on Thursday. Sales rose 8 percent to 3.3 billion euros.

The company booked 3.9 billion euros of new orders in the period, compared with 6.4 billion euros a year earlier, when it secured a 4 billion-euro contract in South Africa. Alstom had a backlog of 27.7 billion euros at the end of the quarter, which equates to more than four years of sales, it said.

“Alstom achieved a sound commercial performance in transport during the first half,” outgoing Alstom Chief Executive Officer Patrick Kron said in the statement. The new order performance was “fueled by small and mid-sized contracts across all regions,” he said. Kron will be replaced by Henri Poupart-Lafarge, an executive vice president of Alstom, the company said.

Alstom, which has said it will have little or no net debt after the GE transaction and a proposed share buyback of 3.2 billion euros announced on Wednesday, is focusing on a rail market that is starting to consolidate. China’s two largest trainmakers have agreed to merge, Japan’s Hitachi Ltd. has bought Italian trainmaker AnsaldoBreda SpA, while Canada’s Bombardier Inc. is considering selling a stake in its rail unit.

Alstom reiterated its prediction for sales growth of more than 5 percent per year “organically,” while the operating margin will gradually improve within a range of 5 percent to 7 percent, compared with 5.1 percent in the first half.

The company reported a net loss of 57 million euros in the first half, compared with a 255 million-euro profit a year earlier. Net income from continued operations, which fell 38 percent, was affected by costs related to the GE transaction, as well as higher temporary finance expenses and some impairment charges, Alstom said.

The shares have gained 15 percent this year to 30.99 euros, valuing the company at 9.6 billion euros. The company will buy back the shares at 35 euros each.

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