Alstom Net Debt Rises Following Grid Acquisition

The Tip Desk · September 30, 2010 · 2 min read

The rail and power company reported a negative free cash flow of 963 million euros for the first half of 2010.

Alstom, the power and transport equipment maker, shifted from a net cash position of 2,222 million euros on March 31, 2010, to a net debt position by September 30, 2010. This transition followed the 2.4 billion euro acquisition of Grid, a 364 million euro dividend payment, and a negative free cash flow of 963 million euros during the first half of 2010.

To support its liquidity, the company increased two existing bond loans by 500 million euros during the semester. On October 5, Alstom issued two new bonds of 500 million euros each, maturing in October 2015 and 2018, to meet general financing needs. The company holds a BBB+ rating with a negative outlook from Standard & Poor’s and a Baa1 rating with a negative outlook from Moody’s.

Financial performance for the first half of 2010/11 showed a decline in overall profitability. The group reported an operating result of 763 million euros, down from 828 million euros in the same period the previous year. The operating margin fell to 7.3% from 8.6%. Net result for the group was 401 million euros, compared to 562 million euros in the first half of 2009/10.

The Power sector experienced a contraction in activity, with revenue falling 13%. This was driven by a 21% decrease in activity within Thermal Systems & Products. The sector's operating margin dropped to 8.5% from 9.8%. The company said the expected recovery in demand for new thermal power plants in Europe and the United States did not occur. Conversely, the company noted growth in renewables and service activities.

Transport revenue rose 5%. The sector achieved an operating result of 213 million euros, a 9% increase over the 195 million euros recorded in the prior year period. The operating margin for Transport rose to 7.3%. The company attributed this to project execution and strict cost control.

Grid contributed 1,527 million euros in revenue and 88 million euros in operating result during its first four months of consolidation. The sector's operating margin was 5.8%. Alstom is deploying a performance plan at Grid to rationalize costs and increase market share.

The group's total order backlog stood at 45.3 billion euros as of September 30, 2010, representing 23 months of revenue. Alstom confirms its operating margin forecast of between 7% and 8% for the 2010/2011 and 2011/2012 fiscal years.