French train maker Alstom slashes profit targets over delivery delays

A picture taken on February 1, 2023 shows Alstom's logo on the Coradia ilint Hydrogen train during its first tests between Reignac-sur-Indre and Loches, central France. (Photo: AFP)

Alstom warned Monday that further "execution issues" for its new Coradia Max trains and other projects would hammer its profitability this year as the company races to get its operations back on track.

It was the second warning since April, when Martin Sion took over as chief executive, that profits would not meet targets due to production problems.

The fresh delays sent Alstom shares down more than 25 percent on the Paris stock exchange, bringing their loss since the start of the year to nearly 60 percent.

"I have requested rigorous identification and escalation of project-level risks and opportunities, mobilising dedicated teams of Alstom experts on most critical projects, including Coradia Max," Sion said in an earnings statement.

"Today's announcement reflects the consequences of this exercise," he said, vowing to "accelerate operational improvements" while also cutting debt by around two billion euros over the next year.

Alstom now expects to build around 4,000 rail cars this year, down from a target of 4,400-4,500, after halting Coradia Max operations earlier this year "to resolve identified issues and minimise subsequent retrofit work".

It added that "additional technical issues and testing requirements" for the Coradia trains had surfaced, though without specifying what the problems were.

Its operating margin fell to a negative four percent in its fiscal first half to end-September, with free cash flow also negative at 1.5 billion euros, and margins are now projected to recover to just one percent for the full year instead of 6.5 percent.

"The group's near-term priorities are centred on consistent deployment of lean practices in manufacturing and engineering, faster resolution of operational issues, greater accountability of project managers, cost and procurement initiatives and simplification of processes," Alstom said, promising "key decisions" by early 2027.