For the second time this year, French train manufacturer Alstom has sharply lowered its annual financial forecasts. The problem is not a lack of orders but their execution.
Alstom cites implementation issues with the Coradia Max platform as the main cause. Although hundreds of Coradia Max trains have already been ordered, Alstom is currently facing major production and delivery problems with this modular electric double-decker EMU (EMU) designed for regional transport in Germany.
This led to a significant profit warning from Alstom, as the company had to absorb nearly 950 billion euros in gross margin adjustments and fines. As a direct result, Alstom’s stock price plummeted by more than 27% on the stock market. For now, the direct impact on the 2 Belgian locations appears to be limited.
Domino effect
Alstom has secured 6 major German contracts for the Coradia Max, a new type of regional train. Together, they are worth approximately 5 billion euros and involve 208 train sets (850 cars).
The 34 trains for Lower Saxony were originally scheduled for 2024 but have now been postponed for the 7th time. For Baden-Württemberg, 80 of the 130 trains were supposed to be delivered by December 2025; Alstom ultimately expected to deliver only 14.
The main causes of the delay are material shortages and unforeseen problems in the production and approval process. “Not only were there technical problems, but the organization responsible for managing the project was neither efficient nor effective,” said Chief Financial Officer Bernard Delpit in an analysis.
As a result, Alstom faced contractually stipulated penalties that are eroding its margins. However, problems in the final development phase, which, for example, will delay the delivery of the first railcars to the first customer by 9 months, have also created a “domino effect” on other German projects. This explains why the projects in Germany are now resulting in a negative margin and negative cash flow.
Lower production forecast
For its current fiscal year, which runs from April through March, Alstom is therefore lowering its production forecast from 4,400 or 4,500 to 4,000 railcars.
The adjusted operating profit margin is expected to be just 1%, after the manufacturer lowered that target in April from 8-10% to 6,5%. There will also be a cash flow shortfall of 1,5 billion, while free cash flow is still expected to be “positive” according to the latest forecasts.
And although revenue grew by only 2% (to 9.3 billion), the company also received 11 billion euros in new orders.
No impact on Belgium for the time being
Alstom, with Martin Sion as its new CEO since April, is now conducting a broader review of the group and aims to reduce costs further. In addition, a new plan is being developed to reduce debt by approximately 2 billion euros, which will also involve divestitures. “We have identified assets and have begun the process,” Delpit said. He declined to provide further details.
The train manufacturer, which has lost more than half of its market value since the beginning of the year, also operates in Belgium, including 2 centers of excellence in Charleroi and a factory in Bruges.
At the latter facility, which employs about 500 people, the company carried out a restructuring this year, resulting in 124 layoffs.
In the coming weeks, the factory in West Flanders will be manufacturing the last M7 double-decker railcars for the NMBS/SNCB railway company. For now, however, this profit warning does not appear to be having any concrete impact on the Belgian facilities.
We may see greater clarity in the second half of 2027, when CEO Sion will present the group’s new organizational structure and medium-term financial goals at a “capital markets day.”
There is also still no concrete agreement between the Spanish company CAF and Alstom Bruges regarding a potential partnership to build the 180 new train sets for NMBS/SNCB.
