Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alstom SA (ALSMY, Financial) reported a strong commercial momentum with EUR10.9 billion in order intake for the first half, supporting their growth strategy.
- The company achieved a book-to-bill ratio of 1.25, indicating a healthy balance between orders received and revenue recognized.
- Adjusted EBIT increased by 18% to EUR515 million, with a margin of 5.9%, driven by growth, cost savings, and improved gross margins.
- Alstom SA (ALSMY) maintained its guidance for the full year, expecting around 6.5% adjusted EBIT margin and positive free cash flow between EUR300 million to EUR500 million.
- The company is seeing robust demand and a strong pipeline, with significant projects in Germany, Western Australia, and France contributing to future growth.
Negative Points
- Free cash flow was negative EUR138 million, although better than the initial guidance of negative EUR300 million to EUR500 million.
- Supply chain challenges have impacted project execution, with 60% to 70% of delays attributed to these issues.
- The rolling stock production decreased by 11% compared to the same period last year, affecting overall production targets.
- The company faces ongoing challenges with legacy projects like Aventra, which continue to weigh on the P&L.
- There is uncertainty regarding the impact of potential tariffs in the US, although the company has a largely US-based supply chain.
Q & A Highlights
Q: Could you give us more detail on the impact of supply chain challenges and how they have affected your financial performance?
A: Henri Poupart-Lafarge, CEO: We have been quite agile in adapting to supply chain challenges, focusing on suppliers facing difficulties. Although 60% to 70% of project delays are due to supply chain issues, we achieved our sales targets and managed to limit financial impact. The good commercial momentum and higher progress payments have helped mitigate these issues.
Q: Are tariffs a concern for your US business, especially with potential changes in the political environment?
A: Henri Poupart-Lafarge, CEO: In the US, our supply chain is largely US-based, with 90% to 95% of production occurring domestically. We do not expect significant changes due to political shifts. We are actively managing the supply chain, and while some issues are localized in the US, we do not foresee major disruptions.
Q: What is your outlook for the US market, and how are labor costs affecting your operations in Europe?
A: Henri Poupart-Lafarge, CEO: The US market benefits from the Job & Infrastructure Act, providing opportunities with Amtrak and other projects. In Europe, we are beginning union negotiations, which typically occur in January and February. The situation is complex due to inflation fluctuations, but we aim to address expectations accordingly. Restructuring efforts, particularly in Germany, are ongoing.
Q: Can you explain the reduction in your car production outlook and its implications on P&L and cash flow?
A: Henri Poupart-Lafarge, CEO: Approximately 70% of the reduction is due to supply chain issues, with some projects in the start-up phase taking longer. While there is a cash impact, we have managed production flow to minimize it. Unlike past issues, we can now better align cash outflows and inflows, allowing us to maintain our guidance despite reduced production.
Q: How are you managing contractual risks related to supply chain issues, and do you have adequate protection in your contracts?
A: Henri Poupart-Lafarge, CEO: While we cannot fully pass supply chain risks to suppliers, we have improved contract management. Contingencies are in place for such issues, and we have made progress in managing supplier contracts. However, some risks remain, and we continue to work on mitigating them.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
