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Shares in French high-speed train maker Alstom plunged 37% on Thursday morning after it slashed its free cash flow forecast as UK projects and other deliveries were delayed.
The group said in a statement late on Wednesday that it now expects free cash flow to be negative 500 million to 750 million euros this year, contrary to its previous forecast of “significant positive”. The company’s shares fell 34% to 14.2 euros in Paris, valuing it at 5.46 billion euros.
Alstom blamed part of the blame for a sharp increase in inventory build-up and delivery delays, particularly in the United States and Europe.
About half of the impact came from increasing production to meet new orders, the company said. “This, combined with tight supply chain conditions, has resulted in significant increases in inventory and contract asset levels to avoid production disruptions and delivery delays in the first half of the year, particularly in the Americas and Europe,” it said.
The company said one-third of the tight cash flow stemmed from delays in completing the UK’s Aventra project, an electric train project it undertook after acquiring Canada’s Bombardier Transportation in 2020. Alstom also suffered from lower down payments as orders fell below expectations in the first half of the fiscal year.
Deutsche Bank analyst Gael Debray said the hit to cash flow was “a significant blow to management’s credibility.” Alstom’s investment grade rating “is now at risk and a capital increase is increasingly likely”.
Alstom agreed to buy Bombardier’s train unit in a deal of nearly 7.5 billion euros as the company seeks to expand in response to growing competition in China and growing demand in Europe. A year ago, EU antitrust regulators blocked a merger with Germany’s Siemens.
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