Rail Giant Alstom Hits a Bump in the Road
Temporarily suspending investments in Alstom company
In an unexpected turn of events, Alstom, the leading railway manufacturer, disappoints investors with a gloomy fiscal outlook. The French powerhouse's shares dip by as much as 17%, sliding to a five-week low. The company's free cash flow for the current financial year is projected to be between €200 million and €400 million, leaving analysts' expectations of €551 million far out of reach.
While the company's financial year 2024/25 shows a significant improvement, with a net profit of €149 million and a 4.9% increase in sales to €18.5 billion, the disappointing cash flow forecast casts a shadow over this positive development.
The adjusted operating result (EBIT) saw a substantial 18% increase to nearly €1.2 billion, but the margin was slightly below analysts' expectations. The company attributes the improved results to a rise in rolling stock sales, particularly the ramp-up of contracts in Australia, as well as strong performance in France, Italy, South Africa, Belgium, and the US.
Last fiscal year, Alstom managed to cut down non-operational expenses by half, from €510 million to €198 million. For the current fiscal year, Alstom plans to achieve an organic sales growth of 3 to 5% and an adjusted EBIT margin of around 7%.
A Mixed Bag of Results
Despite the company's impressive turnaround, the outlook for cash flow leaves much to be desired. Here's a brief look at Alstom's key financial highlights from the fiscal year 2024/25:
- Sales: Sales rose by 4.9% to €18.5 billion. Organic growth clocked in at 6.6%.
- Adjusted EBIT: Alstom saw an 18% jump in adjusted EBIT to nearly €1.2 billion, resulting in an adjusted EBIT margin of 6.4%.
- Free Cash Flow: The company reported a free cash flow of €502 million, significantly surpassing market expectations.
- Net Profit: There seems to be a discrepancy in net profit figures, with some sources reporting €149 million, while others cite €498 million.
With a focus on future performance, Alstom aims to achieve an adjusted operating margin of 7% in the upcoming fiscal year 2025/26. The company also aims for an organic sales growth between 3% and 5%. The projected free cash flow for FY 2025/26 sits within the range of €200 to €400 million, with a medium-term ambition of at least €1.5 billion in cumulative free cash flow from FY 2024/25 to FY 2026/27.
As for the Q1 2025 results, these details are yet to be released in the available search results.
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In light of Alstom's Q1 2025 results yet to be disclosed, potential investors might want to consider the company's community policy and governance structure, especially amidst concerns regarding the future of its employment policy and the projected free cash flow for FY 2025/26, which remains within the range of €200 to €400 million. A strategic approach to investing in Alstom could involve monitoring its financial performance in the stock-market, taking into account the company's significant improvement in sales and adjusted EBIT for FY 2024/25, while remaining cautious about the current cash flow situation.
