Paris-based rail engineering firm Alstom has announced its results for the 2023 financial year, with EBIT (earnings before interest and tax) profits of €997 million ($1.08 billion), and a future order book worth €18.9 billion ($ 20.4 billion). However, despite the apparently positive numbers. the company also reported that overall it had a net loss of €309 million ($334 million) and that the amount of free cash available to fund activities was in negative territory at minus €557 million (minus $ 601 million).
In the short term, Alstom has overcome this cash crunch by arranging a one-year credit facility worth €2.25 billion ($2.43 billion), but longer term it has announced it is seeking new investment from existing and potentially new shareholders to remove around €2 billion ($2.16 billion) of debt. To raise new money, Alstom is tapping the international bond markets, planning a €750 million ($810 million) bond issue, and a rights issue via the Paris stock market aiming to raise €1 billion ($1.08 billion) by selling additional shares in the company. In both case, it aims to secure the investments by September.
Alstom took on a lot of extra debt in 2021 when it bought the Berlin-based rail transport business of Canada’s Bombardier, paying €4.4 billion ($4.75 billion) and taking on Bombardier Transport’s financial liabilities. Alstom also took on a series of underperforming contracts from Bombardier, with train fleets delayed due to quality or reliability problems, which delayed acceptance by customers especially in Germany and Britain. As a result, the company has been looking to cut costs, and announced over 1,500 jobs would be lost across Europe, with a larger number likely as a result because of effects on subcontractor suppliers.
Many of these job losses are likely in Britain, where no major orders for new trains have been placed in recent years. For much of this year, the main Alstom site in Britain – the former Bombardier shop at Derby (parts of which date back to the Midland Railway shops opened in 1873) — was slated for closure, although a last-minute order for additional trains for London’s Elizabeth Line in recent weeks has given the site another year of work.
American orders
Included in Alstom’s 2023 order book were two big contracts in the U.S.: one for 130 low-floor electric Citadis light rail vehicles for the Southeastern Pennsylvania Transportation Authority, with options for an additional 30 cars, plus 60 single-level rail cars for Connecticut Department of Transportation, with options for up to 313 more.
Alstom is also still midway though building the “new Acela,” or Avelia Liberty high speed trains for Amtrak, an order originally slated to have been completed in 2022. Thirteen of the 28 trainsets are now reported completed. Approval testing is continuing.
Russian business sold
Alstom also disclosed it has now completely disposed of its share in its former Russian partner company as part of planned sales of businesses to focus its activities and generate cash. The company also sold its non-digital North American signal business to German rail supply firm Knorr-Bremse for around €630 million ($680 million) [see “Alstom sells North American signal business …,” Trains News Wire, April 19, 2024]. The cash from both sales will be used to reduce its debts.
In 2022, following Russia’s invasion of Ukraine, Alstom stopped working directly with its former partner in Russia — the country’s biggest rail engineering firm, Transmashholding (TMH), in which it had held a significant stake since 2009. As well as helping TMH design more modern electric locomotives and passenger trains, Alstom had begun using TMH factories to manufacturer large components for orders in Europe — for example, body shell components for Citadis light rail vehicles. Alstom had bought a 25% stake in TMH in 2009, increasing it to 33% in 2015. Following a merger between the privatized Russian national rolling stock maintenance company LocoTech and TMH in 2018, the Alstom holding in the combined company was reduced to 20%, which it has now sold.
In 2023, Alstom announced it had written off its Russian investment at a cost of €441 million ($ 476 million), but according to the company’s 2023 annual report it only decided to sell its stake following the decision of the U.S. government to apply sanctions to the main TMH holding company in September 2023. Alstom has now announced it has sold its stake in TMH, but the overall financial impact has been reduced to €122 million ($132 million) by a mixture of the €75 million ($81 million) cash Alstom received from the new Russia-based investors and accounting adjustments for changes in exchange rates over the 15 years it had owned the Russian stake.
I have said it more times than I can count. Mergers never benefit employees or customers. Look around you, there is not enough space on this page to list mergers that have gone south.
If I recall, Bombardier’s Euro component was the former Daimler trains, which Bombardier bought from DaimlerChrysler. Everything went south, trains and autos both.
And what of Alstom’s legacy Bombardier orders? NJ Transit has a grunch of multilevel MUs on order.