Alstom Sees €1.5 Billion Cash Shortfall, Cuts Margin Outlook to About 1%
Key Facts
Alstom cut its free cash flow forecast for fiscal 2026/27 to negative €1.5 billion, from previous guidance for positive cash flow, and lowered its adjusted operating margin forecast to about 1% from 6.5%. In its preliminary first-half results, announced on 2 November, the company said the new margin forecast assumes a recovery to about 6.5% in the second half. The revision followed negative free cash flow of €1,248 million in the six months ended 30 September, compared with negative €740 million a year earlier. The company also withdrew its previous forecasts for annual sales and production growth. Its shares fell 30% in early Paris trading that day, according to Reuters.
Project performance was the main drag, with the adjusted operating margin for the first half falling to about negative 4%, compared with 6.4% in the same period of the previous fiscal year. Alstom attributed the decline largely to gross margin adjustments on projects executed for and from Germany. It said its reviews had identified execution risks, additional work and schedule changes, along with knock-on effects on other projects. According to the company, those developments led to adjustments to completion margins on selected projects. Chief Executive Martin Sion said the company had sought to tighten the identification and escalation of project risks and opportunities since his appointment in April 2026.
Extended train certification schedules and delayed entry into commercial service affected the timing of cash flows. Alstom said the expected full-year cash shortfall stemmed mainly from milestone payments shifting into later fiscal years as certification schedules lengthened, with delays linked to major projects including Coradia Max trains. In the first half, the company halted Coradia Max production during the first quarter to address execution problems and reduce subsequent rework. Alstom produced 1,860 cars in the first half, down 8% from 2,017 a year earlier. It cut its production target for the year to about 4,000 cars from a previous 4,400 to 4,500, and lowered its organic sales growth forecast from about 5% to the low-to-mid single digits.
Despite these pressures, first-half sales rose to €9.3 billion from €9.1 billion, an announced increase of 3% and organic growth of 2%. Orders received increased to €11 billion from €10.5 billion in the comparable period. In the second quarter alone, orders totaled €8.4 billion and the book-to-bill ratio was 1.8, while the ratio for the first half was 1.2. Net debt was €1.1 billion on 30 September, compared with €0.4 billion on 31 March. The company attributed the increase mainly to the €1,248 million free cash flow outflow, a €44 million coupon and an €81 million increase in lease liabilities; this was partly offset by €694 million in proceeds from a hybrid green bond issue in June.
On 1 November, Alstom entered into a new €2 billion short-term revolving credit facility maturing in November 2028 and carrying no financial covenants. Cash and cash equivalents stood at €1.65 billion on 30 September, alongside an existing €2.5 billion short-term revolving credit facility and a €1.75 billion support facility. The company said the existing facility was fully undrawn at that date and its commercial paper program balance was zero. The board began reviewing organic and inorganic options to achieve a debt reduction of about €2 billion by September 2027, with flexibility over the timing and scale of the measures. The company reaffirmed its commitment to maintaining an investment-grade credit rating.
The revision comes after free cash flow reached €336 million in fiscal 2025/26, compared with €502 million in the previous year, while net profit rose to €324 million from €149 million. Alstom said its review of project risks and opportunities, conducted by dedicated expert teams, is expected to be completed by the end of the fiscal year. The company plans to announce its official first-half results on 17 November 2026, followed by third-quarter orders and sales on 19 January 2027. It also expects to announce key decisions after reviewing its organizational and operating models by early 2027. The company said performance would begin to normalize from fiscal 2027/28, with a medium-term target of an adjusted operating margin of between 8% and 10%, and plans to present its long-term plan at a capital markets day during the second quarter of 2027.