The burdens of Bombardier’s former rail division continue to plague Alstom, which will spend much more than expected this year – an unforeseen event that is derailing its stock market share. This has significant implications for Caisse de dépôt et placement du Québec’s (CDPQ) multibillion-dollar investment in the French giant, which has plunged about 70% since 2021.
Despite calls for calm launched by the rolling stock manufacturer, it was severely punished by investors on Thursday. On the Paris Stock Exchange, its shares tumbled 37.6%, or 8.06 euros, to close at 13.40 euros.
The bad news behind this debacle? Alstom expects to have drawn down 1.5 billion euros (CAN 2.1 billion) from its reserves for the first six months of its financial year. For the full year, the hole should be around 750 million euros (CAN 1 billion). This change contrasts significantly with the forecast of a previously anticipated “significantly positive” surplus.
Alstom attributes the situation to three elements: higher inventories to support an increase in production, payments that have not yet been received as well as a problematic contract that belonged to Bombardier Transportation. This is the “Aventra” program involving the delivery of 443 trains to five different customers in the United Kingdom.
“It’s a contract that we inherited, that we improved significantly, but that is still in a difficult situation,” commented Alstom’s chief financial officer, Bernard Delpit, in a conference call with financial analysts. , Wednesday, after the markets close.
Without going into detail on the move to be made in this matter, Mr. Delpit warned that the contract will continue to have an impact on the performance of the French giant until the start of the next financial year, which will begin on April 1. .
The stock market plunge that occurred on Thursday further undermines the investment of Quebecers’ nest egg in Alstom. It has collapsed by 69%, or CAN 2.8 billion since January 29, 2021, when the French company officially got its hands on Bombardier Transportation. CDPQ, which owned approximately a third of Bombardier Transportation, had converted its stake in Alstom in addition to purchasing shares of the multinational at a price of 40.67 euros. The investment was then estimated at CAN 4.1 billion.
On Thursday, the block of shares held by the Quebec pension plan manager was worth only 1.26 billion. More than two and a half years after the Caisse’s bet in the world number two rolling stock company, the return is far from being there for the institution.
“We will closely monitor the progress of the company’s work to rectify the situation over the coming months,” says CDPQ spokesperson Kate Monfette. We nevertheless maintain a strong conviction about our investment in Alstom in the long term and more broadly in the sustainable mobility sector. »
With its 17.2% stake, the Caisse is the largest shareholder of the multinational.
Despite the bad news surrounding its cash flow, Alstom reiterated its forecasts for its revenue growth for the current financial year as well as its operating margins.
This was not enough to reassure financial analysts. According to the American firm Stifel, Alstom’s warning will “immediately raise questions” about its financial health.
“We struggle to understand how inventories can increase so massively in the context of improving supply chains,” Stifel argues, raising the possibility that there are “bigger problems.”
For its part, Oddo BHF fears seeing rating agencies like Moody’s lower Alstom’s credit rating – a decision which would notably increase the rolling stock manufacturer’s borrowing costs.
