Alstom mulls capital increase after cash flow warning

"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 said that while the group was considering a capital increase, it was not the preferred option.

French train maker Alstom is considering a capital increase and is seeking asset sales worth up to 1 billion euros ($1.09 billion) to bolster its balance sheet, sending its shares down as much as 21%. The company also flagged some 1,500 job cuts in an attempt to reassure investors after it forecast in October a negative free cash flow of 500-750 million euros for the year to March 2024.

The maker of France's TGV high-speed trains has had about $4.5 billion wiped off its market value this year -- almost half its market capitalisation. Alstom's shares were down more than 15% at 1205 GMT on Wednesday after falling more than 21% earlier in the session, making Alstom the biggest faller on the STOXX 600 in percentage terms.

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 said 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 told analysts. "We felt with the board that there is a risk that this (asset sales) would not be sufficient," he said.

It was not immediately clear which assets would be put up for sale and Alstom declined to detail which assets were in the crosshairs. Only last month, the group's chief financial officer, Bernard Delpit, ruled out the need for a capital increase, but did flag the possibility of offloading parts of the business.

Citi analysts estimated the capital increase could be up to 1 billion euros and said the company's stock could remain volatile until there was a decision. DEBT REDUCTION

Redburn Atlantic analyst James Moore said the group had an array of disposal options. "These would likely include, but are not limited to, their 13 Chinese joint ventures and the commodity freight side of the GE signalling business,” he said in an emailed comment.

Alstom is the world's second biggest train maker 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 of rail assets belonging to Alstom and Germany's Siemens that France had hoped would create a European industrial champion when rail companies globally were looking to consolidate and reduce costs.

Two years later Alstom completed the purchase of Bombardier's rail business. 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. A successful implementation of Alstom's balance sheet plan through asset sales and equity measures "should help improve Alstom's credit profile," said Nathalie Tuszewski, analyst at rating agency Moody's, in an e-mail.

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 said 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 pension fund and the French state-backed investment bank Bpifrance which hold stakes of 17% and 7.4% respectively.

Alstom said the assets disposal program aimed to generate proceeds of between 500 million and one billion euros. 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 = 0.9201 euros)

(writing by Silvia Aloisi and Richard Lough, editing by Louise Heavens and Jane Merriman)