Because several major rolling stock projects are progressing more slowly than expected, French train manufacturer Alstom has withdrawn its financial targets.
Investors reacted negatively to the poor results and punished Alstom severely: on Friday, the stock took a heavy hit, falling by as much as 27,15%.
Profound operational changes on the horizon
Last week, Alstom announced its preliminary results for the 2025/26 fiscal year – revenue rose by 4% to €19,2 billion. In doing so, it also announced that it has withdrawn its free cash flow target of €1,5 billion for the fiscal years 2024 through 2027. The ambition for an adjusted operating margin of 8 to 10% has also been scrapped. Instead, Alstom is now targeting around 6,5%.
“In a sector where tight planning and disciplined execution are essential, some projects have progressed more slowly than expected, which is weighing on margins and cash in the short term,” said CEO Martin Sion, who officially took office as the new top man on April 1. “That is why we are launching immediate actions to improve performance, while preparing for deeper operational changes.”
Impressive €100 billion order book
Alstom has an impressive order book worth a whopping €100 billion, with a record €27,6 billion in orders received during the past fiscal year, but because major projects are falling behind schedule, costs of raw materials, energy, and labor are spiraling out of control, and margins are evaporating even before the train leaves the factory.
The company did not specify exactly which projects are running into trouble. However, it is widely known that the British Aventra contract, a legacy of Bombardier Transportation, which was acquired in 2021, was a problem child. Bombardier already had a reputation for poor project management and was saddled with a portfolio of loss-making contracts, projects that Alstom thus took over, including the problems.
Back in its home country of France, there are delays with the SNCF’s newest TGVs and the trains of the Paris public transit company RATP.
Hit hard on the stock market
Investors reacted harshly to the withdrawal of the targets. On the Paris stock exchange, the stock plummeted by as much as 36%, the biggest drop since October 2023. Nearly 3 billion euros in market value went up in smoke. By 11 a.m., the stock was still down about 29%.
Alstom is active in more than 60 countries, and operates in Belgium, with two knowledge centers in Charleroi and a factory in Bruges. At the latter facility, the company plans to cut 150 jobs starting in mid-2026.
CEO Martin Sion has no rail baggage and comes from the aerospace and defense industries, sectors where rigorous project execution is generally applied more consistently than at Alstom.
Sion is expected to make several tough decisions in the near future, ranging from reducing orders and renegotiating projects to cutting costs and restructuring factories, greater specialization per site, or closures.
