The objective is clear: to reassure investors before the company collapses on the stock market. The world’s second largest railway manufacturer, the French group Alstom, has just announced a cost reduction plan this Wednesday, November 15.
Weighed down by commercial and financial difficulties, the train and tram construction company will notably try to raise the value of its stock market share, which has been in free fall since the announcement of poor economic results at the beginning of October. A debt reduction operation including the elimination of 1,500 jobs.
Replenish the coffers at all costs
The plan presented by Alstom to get back into working order aims in particular to reduce more than half of its current debt: raising more than 2 billion euros by March 2025, compared to a debt of 3.4 billion euros. euros. To achieve this, one of the most significant announcements concerns the reduction in its workforce: the plan provides for the elimination of 1,500 jobs. This reduction would only concern commercial and administrative functions, which would represent 10% of their workforce.
Alstom also plans to separate itself from some of its assets, that is to say, to sell part of its property (buildings, land, patents or others) to replenish the coffers. This operation should make it possible to raise between 500 million and 1 billion euros. The company is also discussing a possible increase in its capital to raise funds, “depending on market conditions”, indicates its CEO Henri Poupart-Lafarge.
Changes in strategy and direction
Beyond downsizing, the group wants to change strategy. Alstom also announces in the future that it wants to position itself on quality order intake, where the potential margin is greater. The multinational therefore plans to focus on more profitable calls for tenders, particularly in the field of services. The manufacturer also hopes to improve the performance of its operations, aiming to reduce delivery times.
Finally, the restructuring also affects the top of the group. The debt reduction plan thus plans to dissociate the functions of chairman of the board of directors from that of general manager from July 2024. CEO Henri Poupart-Lafarge will remain general director, but will cede this presidency to the former general director of Safran , Philippe Petitcolin.
A crisis that has accelerated since the beginning of October
An announcement which echoes criticism of the poor management of the company, after the announcement of poor results at the beginning of the month. On October 4, Alstom revealed to its investors excessive cash consumption. Its free cash flow, that is to say the money that the company generates or consumes and which is actually available, plunged into the red during the first half of 2023-2024 of its staggered financial year. With a negative amount, estimated at -1.1 billion euros.
An indicator of economic performance closely scrutinized by investors. The next day, the stock plunged more than 37%. A trend accelerated by a downgrade of its rating by the Moody’s agency on October 12, bringing the company even closer to the speculative category. Alstom has not recovered since: this Wednesday noon, the company’s shares had fallen by almost 19% on the Paris Stock Exchange. It had already been halved since the start of the year, notably following a 16% drop in orders in the first half compared to the previous year.
For the CEO of the Henri Poupart-Lafarge group, this cash flow problem “constitutes a clear call for change”, he indicates in the results press release. In the meantime, Alstom has already announced its intention not to pay any dividend next summer.