Alstom: but the situation seemed to be improving…

After an absolutely remarkable year on the stockmarket in 2024 (the share price rose by 77%), the rail equipment manufacturer seemed to be doing better. The Covid years and those that followed were indeed complicated, particularly due to the very difficult integration of Bombardier and the increasingly worrying operational situation given the company's inability to free up cash. The prospects offered by its robust order book and the general enthusiasm for rail seemed to have reassured investors. However, this morning, the stock fell sharply on the Paris Stock Exchange: down 16% at the time of writing.

In our columns, we have repeatedly mentioned Alstom's progress in recent months, despite its particularly difficult position. For example, here.

The underlying situation of the rolling stock manufacturer has of course not changed and remains delicate: the rail industry is extremely capital-intensive and very demanding in industrial terms. Production cycles are long and complex. The legacy of the Bombardier acquisition is highly complex, as Alstom has inherited numerous unprofitable contracts from the Canadian company. Finally, there is the debt, which is under control at this stage but remains a sword of Damocles if Alstom again struggles to generate cash.

Despite all this, Alstom had sent reassuring signals in recent months: good quarterly figures, better than its competitors, a well-filled order book providing renewed visibility, and general political support for rail transport.

It was against this favorable backdrop that shareholders awaited the group's results this morning.

The annual figures – for a staggered financial year – are in line with analysts' expectations. Revenue rose by 6.6% on a comparable basis, and free cash flow was positive at €502m, well above the consensus forecast of €330 million. Nevertheless, in a protectionist move, no dividend will be paid for the financial year.

However, the outlook is dampening the mood. It is considered too cautious. Organic growth is expected to be between 3% and 5%, which is lower than last year. The same is true for free cash flow, Alstom's most closely watched performance indicator, which is expected to be only between €200m and €400m.

As is often the case, the importance of the outlook takes precedence over the results. Oddo BHF regrets these announcements: "The group will not be able to increase its free cash flow year after year, and 2025-2026 will remain a transition year, still impacted by working capital requirements."

Alstom has thus wiped out a large part of its April gains. In an industry like this, progress is made step by step. Alstom is on the right track. But efficiency gains, as well as the favorable opportunities offered by the German infrastructure stimulus plan, will take time to materialize. Slowly but surely, assuming, of course, that the operational situation does not deteriorate.