Train maker Alstom sees higher annual margin but delays mid-term targets

By Lina Golovnya and Diana Mandia

(Reuters) -French train maker Alstom (EPA:) on Wednesday forecast a rise in its annual operating margin, saying the market momentum remained very positive, but delayed its mid-term targets by one year due to high inflation.

Alstom shares were down 4.8% at 0749 GMT, the worst performer on the French blue-chip index .

Train makers like Alstom stand to benefit from a push towards the decarbonisation of transport, but soaring inflation triggered by the war in Ukraine has driven up input costs and worsened supply chain disruptions for them.

“Over the last few months, we’ve been working toward increasing the share of index contracting, our backlog reaching 71% in fiscal year 2023,” finance chief Laurent Martinez told analysts in a call, adding that Alstom expected this share to exceed 80% by 2026.

Alstom, which is recovering from the costly acquisition of Bombardier (OTC:)’s rail business in 2021, expects an adjusted operating profit (EBIT) margin of 6% and “significantly positive” free cash flow in the twelve months to the end of March 2024.

It reported a margin of 5.2% based on adjusted EBIT of 852 million euros ($938 million) for fiscal 2022/23, slightly above the 848 million euros expected by analysts in a company-compiled consensus.

The company received new orders worth 20.7 billion euros during the year.

But the rail infrastructure company said it expected to reach its medium-term EBIT and cash flow targets only in 2025/26, one year later than previously envisioned, mainly due to the challenging economic environment marked by high inflation.

The manufacturer of high-speed TGV trains said it would propose a dividend of 0.25 euros per share at a shareholders’ meeting in July.

Alstom will hold an investor day later on Wednesday.

($1 = 0.9084 euros)