- Ambitious cost saving programme
accelerated
- Strategic mobility to be enhanced
through asset sales
- Guidance maintained
Regulatory News:
Between 1 April and 30 September 2013, Alstom (Paris:ALO) booked
€9.4 billion of orders, down 22% compared to the first half of last
year. The book-to-bill ratio, close to 1, benefited from a good
flow of small to medium-sized orders despite a less active market
for big contracts. Over the same period, sales were up 4%
organically, amounting to €9.7 billion, thanks to the ramp-up
achieved in the second quarter. Income from operations and the
operating margin were stable at around €700 million and 7.1%
respectively. The net profit stood at €375 million whilst the free
cash flow at €(511) million was mainly affected by the unfavourable
cash profile of some contracts being executed during the period and
by limited downpayments due to the level and mix of orders
received.
Key figures
(in € million)
30 September
2012 *
30 September
2013
% change
reported
% change
organic
Actual figures Orders received 12,129 9,431
(22)% (20)% Backlog 52,015 50,890 (2)% 2% Sales 9,748 9,730 0% 4%
Income from operations 703 695 (1)% Operating margin 7.2% 7.1% -
Net income 386 375 (3)% Free cash flow 101 (511)
-
* Adjusted for revised IAS 19
“In markets that remain contrasted, our commercial activity in
the first half was supported by a good flow of small and
medium-sized orders, but lacked large contracts, notably in Thermal
Power. As expected, sales recovered in the second quarter leading
to a 4% organic growth in the first half. With strict cost control
and good execution of contracts, the operating margin remained
stable. Tendering is active and we expect stronger order bookings
by the end of the year, which will support free cash-flow rebound
in the second half. Looking forward, we maintain the guidance given
at the close of FY 2012/13. In the current low-growth environment,
we need to further reinforce our competitiveness; we are
accelerating our performance plan and expect annual cost savings
ramping up to € 1.5 billion by April 2016. We want to regain
strategic mobility and have launched an asset disposal programme
targeting €1 to 2 billion of proceeds through the contemplated sale
of a minority stake in Alstom Transport and the disposal of
non-strategic assets”, said Patrick Kron, Alstom’s Chairman &
Chief Executive Officer.
***
Contrasted markets
During the first six months of 2013/14, the macro-economic
conditions have remained challenging with a sluggish economic
environment in mature countries and a slower growth in some
emerging countries.
In power generation, while demand in steam remains stable with
opportunities in Eastern Europe, Middle East and Asia, gas recovery
is postponed in the mature markets. Thermal services and
environmental control systems continue to show good dynamism. As
for renewable, the hydro market improved compared to last year and
some large projects are expected to resume over the medium-term.
Onshore wind remains under significant price pressure while
offshore wind shows opportunities notably in Europe.
The power transmission market continues to benefit from
sustained demand in HVDC and smart grid while AC is still suffering
from overcapacity and pricing pressure.
Finally, demand for rail transport equipment and services
remains sustained, supported by urban and regional needs in Europe
and expansion in emerging markets.
Book-to-bill ratio close to 1 thanks to a robust flow of
small and mid-sized orders
Orders booked over the first half of 2013/14 amounted to €9.4
billion, a 22% decrease from the same period last year, with a good
flow of small to medium-sized orders despite a less active market
for large contracts, notably in Thermal Power. On 30 September
2013, the Group’s backlog amounted to €51 billion, representing 30
months of sales.
During the semester, Thermal Power registered once again a
strong level of orders in Services, at €2.7 billion, while
orders for new power plants remained limited.
Renewable Power orders rebounded strongly, at €1 billion, thanks
to new hydro projects (Albania, Turkey, Canada and India) and
services. Several wind contracts were signed over the first six
months too (Mexico, Brazil).
Grid recorded €1.7 billion of contracts, a stable level if
adjusting from the ultra-high voltage direct current (UHVDC)
contract signed last year in India.
Transport registered a sound level of orders at €2.9 billion,
decreasing compared to an exceptionally high level of contracts in
H1 2012/13. Commercial activity remained sustained with, in
particular, very high-speed and intercity trains in France, light
rail overhaul in the USA and an infrastructure contract in the UK.
In October, Alstom announced two mega contracts, one of €1.2
billion for the metro of Riyadh and one of around €4 billion for
suburban trains in South Africa.
Stable operational performance
Sales in the first half of 2013/14 amounted to €9.7 billion, up
4% organically, with all Sectors reporting positive organic growth.
The second quarter showed a significant rebound in sales, growing
10% on a like-for-like basis, with notably a strong growth for
Thermal Power (+12%) and Transport (+10%) while Renewable Power and
Grid sales increased organically by 5% and 4% respectively.
Supported by sound project execution and on-going cost
reduction, both the income from operations, at €695 million, and
the operating margin, at 7.1%, were globally stable in the first
half of 2013/14 as compared to the same period last year. The
operating margin in Thermal Power remained strong at 10.6%,
benefiting mainly from good project execution and actions on costs.
Renewable Power’s operating margin was affected by continued
pressure on wind prices and decreased from 5.7% in the first half
2012/13 to 5.1%. Better volumes and actions on costs allowed margin
to improve from the low point of H2 2012/13 (4.1%). Grid’s
operating margin decreased from 6.1% in the first half of last year
to 5.7% as a result of continuing negative impact of overcapacity
and price pressure in AC, partly mitigated by overall good
execution of projects and cost optimisation.In Transport, the
operating margin increased from 5.3% in the first half 2012/13 to
5.6% thanks to tight cost control.
Net profit amounted to €375 million compared with €386 million
in the first half of 2012/13 when adjusted for revised IAS 19.
Free cash flow impacted by some project profiles and
downpayments
Free cash flow amounted to €(511) million in the first half
2013/14. Unfavourable cash profile of some contracts executed
during the period and downpayments, which were impacted by the
level and mix of orders received, weighed negatively on working
capital change. Nonetheless, other components have been kept under
strict control thanks to continuous efforts on working capital.
The Group had a gross cash in hands of €1.8 billion at the end
of September 2013 and a confirmed undrawn credit line of €1.35
billion. On 1 July 2013, the Group launched a new bond issuance of
€500 million which bears an annual coupon of 3.0% and will mature
in July 2019. Gradual repayment of the debt is scheduled to start
in September 2014.
Following the payment of the dividend, the Group’s net financial
debt came to €(3,294) million at 30 September 2013 versus €(2,342)
million at 31 March 2013 and €(2,871) million at 30 September
2012.
Equity was stable over the period, standing at €5,006 million at
30 September 2013 from €5,089 million at 31 March 2013 (adjusted
for revised IAS 19).
A comprehensive action plan
As already stated when the 2012/13 accounts were released,
demand in a number of markets is weaker than expected 18 months
ago. Economic growth has not recovered to pre-crisis level in a
number of mature countries and has slowed in emerging countries. In
this context, Alstom is enhancing its on-going plans to improve its
competitiveness and adjust cost base to this low-growth scenario
and is taking action to increase its strategic mobility.
The Performance plan, named “d2e” (dedicated to excellence), is
accelerated and enhanced with two targets: (i) reinforcing the
Group’s long-term competitiveness and (ii) consolidating the
medium-term guidance. Alstom is targeting annual savings ramping up
to €1.5 billion by April 2016 as compared to the 2012/13 cost base.
In this context, the restructuring costs associated with this plan
are expected to be in the €150-200 million range per year.
To increase financial flexibility and enable strategic mobility
for both Alstom Group and Alstom Transport, the Group will study
the sale of a minority stake in Alstom Transport to industrial
partners or financial investors. Alstom also intends to dispose of
non-strategic assets. Globally this programme is targeting €1 to
2 billion of proceeds by December 2014.
Outlook
The Group maintains its guidance of a low-single digit sales
growth on an organic basis and of a stable operating margin in
2013/14, which should then gradually increase to around 8% over the
next two to three years. Free cash flow should be positive year
after year over this period.
*
The half-year financial report can be found on Alstom’s website
at www.alstom.com.
This press release contains forward-looking statements which are
based on current plans and forecasts of Alstom’s management. Such
forward-looking statements are relevant to the current scope of
activity and are by their nature subject to a number of important
risk and uncertainty factors (such as those described in the
documents filed by Alstom with the French AMF) that could cause
actual results to differ from the plans, objectives and
expectations expressed in such forward-looking statements. These
such forward-looking statements speak only as of the date on which
they are made, and Alstom undertakes no obligation to update or
revise any of them, whether as a result of new information, future
events or otherwise.
AlstomPress ContactsVirginie Hourdin / Claire Biau
- Tel +33 1 41 49 21 36 / 39 95virginie.hourdin-bremond@chq.alstom.com ,
claire.biau@alstom.comorInvestor
RelationsDelphine Brault / Anouch Mkhitarian - Tel +33 1 41
49 26 42 / 25 13delphine.brault@chq.alstom.com ,
anouch.mkhitarian@chq.alstom.comorWebsite www.alstom.com
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