Alstom, the French infrastructure and transport group, has announced a series of measures aimed at strengthening its balance sheet. The plan includes laying off around 1,500 employees, potential asset sales, and new expansion capital strategies to reduce leverage.
The company reported its accounts for the first half of the financial year, showing an attributable net profit of 1 million euros after a loss of 21 million euros in the prior year. Revenue rose by 4.9%, reaching 8.443 billion euros.
However, Alstom had warned in October about a negative free cash flow of 1.119 billion euros for the first half of the year. This shortfall prompted management to outline a comprehensive action plan designed to preserve its investment-grade credit rating and hit medium-term targets.
As part of the plan, the group intends to reduce leverage and safeguard earnings and cash targets by cutting around 1,500 full-time jobs to bring down operating costs. It also aims to strengthen its balance sheet to maintain a solid and sustainable investment-grade rating, with a goal of cutting net debt by 2 billion euros by March 2025.
Shareholders have signaled their support for the plan, and management is coordinating with them to implement measures swiftly. Depending on market conditions, Alstom is exploring several deleveraging transactions, including a divestiture program of assets that are currently operating and expected to generate 500 to 1,000 million euros in income.
The group is also evaluating options such as issuing new shares, refinancing certain assets, and raising preferred capital for shareholders. It stressed flexibility in choosing and adjusting the financing routes as conditions evolve.
In terms of liquidity, Alstom announced a new financing line of 2.25 billion euros arranged with international banks, marked as level one, viewed as an important step to demonstrate financial flexibility. The company emphasized that strengthening fundamentals to support credit metrics and create lasting value for shareholders remains the top priority.
Changes in an organization
Looking ahead to the next shareholders’ meeting in July 2024, the board of directors is expected to recommend Philippe Petitcolin, the former CEO of Safran, as a board member and then chairman. This would mean the transition of the chairmanship away from Henri Poupart-Lafarge, who would continue as chief executive officer. The announcement aligns with the third phase of the merger roadmap with Bombardier and the ongoing simplification of the operational organization in line with the planned workforce reduction.
Regarding cash outflows in the first half, the company is reviewing its employee incentive plan, which includes targets tied to cash performance. About 28,000 employees are expected to benefit from this plan, subject to reaching the specified cash-related targets. [Source: corporate filings and management communications, 2024].