Orders down but record order backlog in Alstom’s first half results

ALSTOM booked €4.6bn of orders during the first half of the 2019-20 fiscal year between April 1 and September 30, down 35% compared with the same period last year, although the supplier now has a new record-breaking backlog of €41.3bn, up 8%. Sales reached €4.1bn during the period, up 3% on last year.

Alstom says the smaller order intake was due to the “exceptional performance” in 2018, which included the French National Railways’ (SNCF) TGV of the Future and Montreal metro orders totalling €4.3bn.

The book-to-bill was strong at 1.1, while adjusted Ebit increased 5% to €319m leading to an adjusted Ebit margin of 7.7%, compared with 7.5% last year. Net income amounted to €213m.

Free cash flow was -€19m in the first half of 2019-20, compared with €172m last year. The negative free cash flow was impacted by an increase in anticipated inventories resulting from the ramp up of large rolling stock projects.

Alstom was awarded projects mainly in Europe for rolling stock and services, including orders for regional, CDG Express and high-speed trains in France; maintenance in southern Europe; metro cars for Barcelona; regional trains in The Netherlands; and hydrogen trains in Germany. Alstom has also been awarded the maintenance of Santiago Metro lines 2 and 4 in Chile, and a contract to install more than 500km of ERTMS on the Paris - Lyon high-speed line.

Rolling stock sales reached €1.89bn (up 9%) with deliveries of regional trains in Europe and the ramp-up of Amtrak and Prasa project in the United States and South Africa respectively. Signalling sales increased 12% to €723m mainly benefiting from activity in the Asia Pacific and American regions. Services sales reached €718m with the West Coast Main Line train maintenance contract in Britain. Systems sales decreased at €801m with an expected ramp-down on Lusail and Riyadh systems projects in Qatar and Saudi Arabia. Latin America sales also decreased.

Alstom maintained its level of research and development at €192m, representing 4.6% of sales. Alstom won two contracts for 41 Coradia iLint hydrogen trains, while SNCF is working with Alstom to deliver 15 regional hydrogen trains within the next two years.

Outlook

Alstom says the 2019-20 fiscal year will be a year of growth stabilisation after the 2018-19 fiscal year which lead to exceptional sales and profitability growth. For 2019-20, the business cycle with the finalisation of major systems contracts and the evolution of large rolling stock projects will lead to a sales and margin growth lower than the average objectives set in the context of the Alstom in Motion (AiM) strategy launched in June, and to a working capital evolution impacting the generation of free cash flow.

Up to March 2023, Alstom is targeting an average annual sales growth rate of around 5%, and expects adjusted Ebit margin to reach around 9% in 2022-23.