Alstom weighs capital increase after cash flow warning

French train maker Alstom on Wednesday said it plans to sell assets worth up to 1 billion euros and is considering a capital increase to bolster its balance sheet and ease investor concerns over its high debt. Job cuts are also targeted as Alstom, maker of the high-speed TGV trains, looks to reassure investors after it forecast in October a negative free cash flow of 500-750 million euros for the 12 months to March 2024.

French train maker Alstom on Wednesday said it plans to sell assets worth up to 1 billion euros and is considering a capital increase to bolster its balance sheet and ease investor concerns over its high debt.

Job cuts are also targeted as Alstom, maker of the high-speed TGV trains, looks to reassure investors after it forecast in October a negative free cash flow of 500-750 million euros for the 12 months to March 2024. Alstom's shares, which slumped by a about a third after the cash flow warning, lost more than 16% in morning trading on Wednesday, making them the poorest performer on the STOXX 600 in percentage terms.

In a statement, Chairman and CEO Henri Poupart-Lafarge said that, while demand remains sustained, the group's commercial performance had softened. "The negative free cash flow of Alstom during this first half is a clear call for change," said Poupart-Lafarge, who will step down as chairman, but remain chief executive.

Poupart-Lafarge later told a conference call that while the group was considering a capital increase, it was not the preferred option. Whether the company proceeded down that track would depend on the success of asset sales, he said. "We felt with the board that there is a risk that this (asset sales) would not be sufficient," he told the call.

Alstom is the world's second biggest trainmaker after China's state-owned CRRC and has contracts on its order books from Britain for its HS2 high speed railway and for the largest train tender in Danish rail history. Brussels in 2019 scotched a merger rail assets belonging to

Alstom and Germany's Siemens that France had hoped would create a European indistrial champion at a time rail companies globally were looing to consolidate and reduce costs through economies of scale.

Two years later it completed the purchase of Bombardier's rail unit. It has been struggling with problem contracts inherited from that acquisition and is facing some short-term challenges, including with some downpayments on deals not coming in as rapidly as planned, despite a healthy order backlog of 90 billion euros. Alstom said it plans to cut its net debt by 2 billion euros by March 2025. As of Sept. 30, it had a net debt of 3.4 billion euros.

The group added it would propose that no dividend be paid for the current fiscal year. Among its leading investors are the Caisse de dépôt et placement du Québec pensions fund and the French state-backed investment bank Bpifrance which hold stakes of 17% stake has 7.4% respectively.

The group said on Wednesday the assets disposal program aimed to generate proceeds of between 500 million and one billion euros. It also said it would cut about 1,500 staff to help meet its mid-term targets. It also said that Poupart-Lafarge would step down as chairman, but remain chief executive. Alstom's board will propose Philippe Petitcolin - a former CEO of Safran - as a new chairman. ($1 = 0.9221 euros)