Temporarily Suspending Investments in Alstom
Headline: Alstom's Profits Soar Despite Disappointing Cash Flow Forecast, Shares Slump
Bestknown as a train manufacturing titan, Alstom stirs up a storm with its gloomy cash flow outlook that sends investors into a tizzy. The French engineering colossus' share prices plummeted by a staggering 17%, hitting a 5-week low following the announcement.
The beleaguered giant has revised its free cash flow forecast for the current fiscal year, leaving analysts in disbelief. Instead of the anticipated €551 million, the company now anticipates a mere €200 million to €400 million—a far cry from expectations.
However, the grim forecast doesn't overshadow Alstom's resurgence in the financial realm. The company boasted a return to profit for fiscal year 2024/25, which culminated in March. Alstom declared a net profit of €149 million, representing a stark contrast from the €309 million net loss in the previous year. Sales rose by a respectable 4.9% to a colossal €18.5 billion, while orders swelled by 4.7% to approximately €19.9 billion.
Elaborating on its performance, the company cited increased rolling stock sales and a strengthened presence in various markets, including Australia, France, Italy, South Africa, Belgium, and the United States. Alstom issued a job-creating pledge in April, promising to hire at least 1,000 new employees in France this year.
The company also notched an 18% increase in its adjusted operating result (EBIT), yielding nearly €1.2 billion. This translated to a 6.4% adjusted EBIT margin, albeit slightly under analysts' expectations.
Behind the Scenes: Alstom's Ebb and Flow
Despite the enticing growth figures, Alstom's disappointing cash flow forecast sends a shiver down the spines of a cautious market. The company's emphasis on improving its operational efficiency and slashing non-operational expenses by 61% to €198 million in the last financial year demonstrated the company's commitment to cutting costs.
For the current fiscal year, Alstom targets an organic sales growth of 3 to 5% and an adjusted EBIT margin of around 7%. Investors will closely track Alstom's progress on these targets, as they are critical indicators of the company's financial health and growth trajectory.
Overall, the French heavyweight has shown potential for continued growth in the global rail market, despite facing short-term challenges pertaining to its cash flow outlook. As Alstom embarks on a new fiscal year, only time will tell whether the company can meet its lofty goals and regain the trust of its investors.
- In an attempt to regain investor trust, Alstom has outlined its community policy to hire at least 1,000 new employees in France, while also focusing on improving its employment policy to enhance operational efficiency and cut non-operational expenses.
- As Alstom's financial health and growth trajectory are under scrutiny due to the disappointing cash flow forecast, investors are keeping a close watch on Alstom's stock-market performance, with the company's emerging investing opportunities in the global rail market potentially driving future profits.
