Alstom SA, a pioneer in sustainable mobility solutions, is actively considering an asset sale, as indicated by its Chief Financial Officer, Bernard Delpit. This revelation comes in the wake of a stark warning regarding the company’s financial outlook, which precipitated a significant €3.1 billion ($3.3 billion) drop in its market value.
Delpit indicated that the matter could be brought before the board if favorable opportunities arose, though he refrained from specifying which assets might be deemed non-strategic. The Paris-based conglomerate’s recent financial tribulations stem from its 2019 acquisition of the Canadian firm Bombardier Inc. for a hefty $5.5 billion. Since this transaction, Alstom has grappled with mounting challenges, attributing delivery delays and subsequent financial strain to what it perceives as Bombardier’s mismanagement of a critical project.
The endeavor in question, known as the Aventra project, encompasses the production of 443 trains slated to service the London Overground and Elizabeth Line. Initially scheduled for completion in the first half of this year, the project’s culmination is now anticipated in the fiscal year 2024-2025. Alstom’s initial projections had promised a “significantly positive” free cash flow for the entire fiscal year. However, the company now foresees a negative flow of €750 million, largely ascribed to heightened inventory levels necessitated by an accelerated output to address the backlog and circumvent potential disruptions.
In light of these developments, Delpit affirmed that the company remains steadfast in pursuing its mid-term targets and organizational expansion. Nonetheless, Deutsche Bank analyst Gael de-Bray cautioned in a report that a capital infusion might be imperative to preserve Alstom’s investment grade rating, deeming it “increasingly likely.”
The reverberations of this financial turmoil were palpable in the market, as Alstom’s euro-denominated bonds maturing in 2029 plummeted over 3%, marking the steepest decline on record, settling at 78 cents on the euro. When pressed about the prospect of equity raising, Delpit stated that it was not presently under consideration.
Recording a negative free cash flow of €1.15 billion for the six months leading up to September, Alstom finds itself contemplating alternative measures to safeguard its financial standing. The company’s apprehensions about its inherited Bombardier project, coupled with the impact on its market value and credibility, have spurred discussions about divesting potentially non-strategic assets.
In contemplating the possibility of an asset sale, Alstom SA faces a pivotal juncture, as the company strategizes to regain financial stability and secure a promising trajectory for its future endeavors. As Alstom charts its course forward in this challenging period, observers will be closely monitoring its strategic moves and decisions, eager to witness precisely how the company navigates these turbulent waters to secure its future stability.
Source: Bloomberg
