Train's off the Rails: Alstom's Bumpy Ride Through Financial Seas
Halt in Alstom's Investment Decisions Temporarily Ensues
Insider Tip: In France's buzziest whispers, it's apparent that Alstom's rocky ride stems from a hiccup in foreseeable cash flow.
The train-churning titan, Alstom, has shocked the market with a sobering outlook for its cash flow, sending investors into frenzies of concern. Market analysts anticipated a whopping 551 million euros in cash flow, but the French engineering powerhouse has thrown a curveball with estimates of a more humble 200 to 400 million euros. Consequently, Alstom's stock has plummeted a dramatic 17 percent and hit a dismal five-week dip.
Crunching the Numbers: Alstom's rebound from the red is, indeed, a sight to behold. The firm reported a whopping 149 million euros net profit in the fiscal year 2024/25, which ends in March, a glaring improvement from the steep 309 million euros net loss the company suffered the year prior. Revenues shimmered with a 4.9% increase, now sitting pretty at 18.5 billion euros, with orders showing an equally enticing 4.7% spike to nearly 19.9 billion euros.
Key Metric Flex: Alstom's rockstar metric, the adjusted operating result (EBIT), belies the company's growth story, nearing 1.2 billion euros, a 18% gain. The result culminates in a pleasing margin of 6.4 percent, albeit slightly under investor expectations.
Rolling with the Punches: Alstom attributes its recent prosperity to an impressive upswing in rolling stock sales. A debt of gratitude is owed to the upward trajectory of contracts in Australia and sterling performances in France, Italy, South Africa, Belgium, and the USA, among others. The company announced plans to plow funds into France and hire at least 1,000 new employees in the coming months.
Digging Deeper: The previous fiscal year bore witness to Alstom's bottom line being bolstered by a substantial reduction in non-operational expenses. From a hefty 510 million euros in 2023/24, the company scaled down non-operational expenses to a mere 198 million euros in the fiscal year 2024/25. In the near future, Alstom aims for moderate organic sales growth between 3 to 5 percent, accompanied by an adjusted EBIT margin of slightly above 7 percent.
Looking Ahead: Although the year ahead is shaping up to be a bumpy ride, Alstom's long-term aspirations remain steadfast. The firm looks beyond the one-year hiccup in its cash flow to a future of growth and recovery, with expectations of reaching an adjusted EBIT margin between 8% and 10% and average sales growth hovering around 5% over the medium term. Alstom's backlog is forecast to surpass 100 billion euros within the coming two years, with a promise from the company to deliver at least 1.5 billion euros in free cash flow from FY25 to FY27.
However, given the company's conservative outlook for the upcoming transition period, Alstom's stock is facing an uncertain future. Analysts remain hopeful, viewing the next couple of years as a crucible for Alstom's lasting growth, particularly in light of potential infrastructure stimulus plans.
In an effort to reinforce its financial stability and sustain growth, Alstom has outlined plans to hire at least 1,000 new employees, funded partly by its own financial resources, which are closely tied to its employment policy. Additionally, the company aims to maintain an adjusted EBIT margin slightly above 7%, highlighting the importance of optimal financial management in its community policy and overall business strategy.
