Alstom

Company Update:
Alstom issued a major profit warning this morning, cutting its FY 2026/27 adjusted operating margin guidance from 6.5% to just 1%, and now expecting negative free cash flow of €1.5bn versus positive FCF previously. 

Organic revenue growth guidance was also reduced from 5% to 2–4%.

The warning reflects severe execution problems, particularly on the Coradia Max platform and other German-related contracts, which pushed the H1 operating margin to −4% versus +6.4% a year earlier.

Alstom also announced plans to reduce debt by approximately €2bn by September 2027, potentially through asset disposals or other measures.

Key H1 figures: Order intake of €11.0, up 5% organically (+5% yoy), and sales of €9.3bn, up by 2% organically (+3% yoy). The decline in sales was driven by 8% lower car production. Adjusted EBIT was -4%, primarily related to gross margin issues associated with the Coradia Max platform. FCF was €-1.25bn compared to €-740m last year.

Expert Opinion:
This is catastrophic. Alstom reaffirmed its revised guidance on 22 July. We see three worrying elements :

1- the scale of the warning in H1 means either that demand is seen as collapsing, and that production issues are far worse than initially expected or that their reporting system is worse than anything possibly imaginable. In both cases, it is a substantial problem.  

2- The revised FY guidance implies a massive rebound which we doubt the market will buy after so many disappointments

3- the EUR2bn deleveraging is needed to fund the expected cash shortfall and prices obtained for assets when you are in dire straits is rarely a good price. This means concerns on the BS (Balance Sheet) may come back. 

In all, we had hopes that the execution problems were behind us and that the company was on pace to recovery.  We believe confidence in the management's ability to turn the company around will be shattered and that Alstom is a non-investible share for the time being.   


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