Alstom takes the direct route to lower credibility

LONDON, Nov 15 (Reuters Breakingviews) – Alstom’s (ALSO.PA) problems are piling up. When divulging last month’s warning on cash flow – which prompted shares to slump 35% – France’s 4 billion euro train group said a capital increase to repair the balance sheet was not on the table. On Wednesday, Chief Executive Henri Poupart-Lafarge conceded that plans to cut debt via asset disposals might not be enough to avoid a cash call after all, sending shares down another 20%.
Alstom’s headaches, which include an inventory build-up, project delays and an order slowdown, haven’t materially changed. But to retain its investment grade credit rating the group needs to slash net debt that has jumped 50% to 3.4 billion euros since March. Moreover, investors can see that an asset disposal plan of up to 1 billion euros is only half the cut in leverage envisaged by March 2025, and Alstom has proposed they won’t get a dividend in the current fiscal year.
At least Alstom’s big shareholders, which include Caisse de dépôt et placement du Québec and French public investment bank Bpifrance, have twigged that Poupart-Lafarge should be stripped of his dual chairman role. But as Denmark’s Orsted (ORSTED.CO) has found, the only thing investors dislike more than operational upheaval is a message that constantly changes. (By George Hay)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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