Alstom, the French train maker, experienced a significant drop in its shares on Wednesday, leading to concerns about the company’s debt level. In response to a cash flow warning in October, Alstom announced that it would be selling assets, cutting jobs, and considering a capital raise.

Divestment Program and Job Cuts to Improve Finances

To address its financial challenges, Alstom intends to raise €1 billion ($1.09 billion) through a divestment program. Additionally, the company plans to reduce costs by eliminating approximately 1,500 positions. These actions are aimed at strengthening Alstom’s balance sheet and achieving a €2 billion reduction in net debt by March 2025.

Cash Flow Woes Rooted in Production Boost and Project Delays

Alstom’s decision to restructure comes on the heels of recent news that the company experienced a €1.15 billion ($1.2 billion) cash outflow in the first half of its fiscal year. This significant outflow was primarily due to expanded production efforts to meet new orders and delays in completing the U.K. Aventra electric train project. As a result, Alstom expects negative free cash flow of €500 million to €750 million for the current year.

Share Price Decline Raises Concerns

The announcement of Alstom’s cash flow challenges had an immediate impact on its share price. The company’s Paris-listed shares (ALO, -16.87%) plummeted by more than a third amid fears that this cash flow crunch could impair its ability to service its net debt, which stood at €3.4 billion at the end of September.

As Alstom navigates through these difficulties, it remains committed to implementing its restructuring plan and regaining financial stability.

Alstom Shares Decline Amid Concerns Over Capital Issuance

Despite a rebound from session lows, Alstom shares closed 17% lower on Wednesday, contributing to a year-to-date decline of 48%. Traders are particularly worried about the possibility of new capital being raised through issuance, although CEO Henri Poupart-Lafarge stated in a recent Bloomberg Television interview that this is not the company’s preferred option. The uncertainty surrounding an equity raise continues to make the stock volatile, as noted by Citi analyst Martin Wilkie.

Broader Stock Market Performance

While Alstom faces challenges, the broader stock market in Paris remains positive. The CAC 40 FR:PX1 index recorded a gain of 0.7% during a buoyant European session, building on the strong gains seen on Wall Street the previous day.

In London, the FTSE 100 UK:UKX index experienced a 1% rise. This boost was primarily driven by resource groups benefiting from positive economic data from China. Additionally, interest-rate sensitive sectors like real estate were encouraged by news of a two-year low in U.K. inflation for October.

Recovery for Siemens Energy

The DAX DX:DAX index in Frankfurt also saw an increase of 0.7%. Notably, shares of Siemens Energy ENR, +6.39% were able to recover more than 6.4%. This recovery follows the company’s successful efforts in securing guarantees from both the German government and private banks. These guarantees aim to support order growth for Siemens Energy, which has been facing challenges in its offshore wind unit.

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