France's Alstom engineers colossal cut in net loss

18th November 2004, Comments 0 comments

PARIS, Nov 18 (AFP) - Alstom, which built the Queen Mary 2 cruise liner and TGV high-speed trains and is a leading maker of power generation equipment, said Thursday it has slashed losses and pulled in orders only six months after completing rescue refinancing.

PARIS, Nov 18 (AFP) - Alstom, which built the Queen Mary 2 cruise liner and TGV high-speed trains and is a leading maker of power generation equipment, said Thursday it has slashed losses and pulled in orders only six months after completing rescue refinancing.

The struggling French engineering group cheered investors with first-half results that saw net loss cut almost in half and orders increase by 51 percent.

The company was rescued with state-orchestrated help last year and signed refinancing agreements with banks in May this year. EU competition authorities approved those arrangements in July and the company raised EUR 1.75 billion (USD 2.28 billion) in August through capital increases.

Alstom shares, which have lost 32 percent since the beginning of the year, jumped by 7.69 percent to EUR 0.56 after the company posted a net loss of EUR 315 million in the first six months of its 2004-2005 fiscal year.

That was just less than half the loss of EUR 624 million for the same period 12 months ago and in line with analysts forecasts that ranged between EUR 245-427 million.

"The half-year results are very encouraging. The group is definitively on the path to recovery," chief executive Patrick Kron said on a conference call, adding, however, "it's obvious that it won't happen overnight".

Alstom began sinking into crisis several years ago while it was in the process of completing the Queen Mary 2 cruise liner at its shipyards.

Its problems arose partly from a slump in the cruise liner business after the attacks in the United States on September 11, 2001.

After selling some key assets, Alstom undertook a refinancing operation early this year that included agreements with banks and a EUR 1.75 billion capital increase through which the French state take a 21.4-percent stake in the company.

However, the state's involvement raised deep competition concerns among Brussels regulators who allowed the refinancing to go through only on condition that the company seek industrial tie-ups within four years.

Meanwhile, new orders have begun to pour in and the company's prospects have brightened.

The results on Thursday showed that Alstom orders jumped by 51 percent to EUR 8.36 billion on a comparable basis, and by 12 percent in nominal terms.

Alstom chairman Patrick Kron said the company experienced a "strong rebound in orders across our sectors, despite continuing difficult market conditions in new power equipment, thus confirming the return of customer confidence".

He said that the group expected to win a contract worth EUR 700 million by the end of the year to equip and maintain a power station in Thailand.

Kron also said that he had asked the French AMF financial market authority to look into the publication on Monday of a 50-page analysis of Alstom's prospects by a Deutsche Bank analyst which sparked a 18.64-percent fall in the price of the company's shares.

Kron said he had asked the AMF to determine whether the way the report had been published was in line with best practice.

The results released Thursday showed that group debt fell to EUR 2.4 billion at the end of September from 3.7 billion in April.

It reiterated its operating margin target of six percent by March 2006 after raising it to 3.6 percent in the first half from 1.5 percent a year earlier.

Analysts had forecast operating margin of 3.3-3.4 percent and a net loss of EUR 245-427 million.

First-half sales fell 28 percent to EUR 6.4 billion, and the group said full-year sales would be around five percent lower on an annual basis.

Free cash flow was approximately a negative EUR 400 million, but Alstom said it would be positive by March 2006.

© AFP

Subject: French News

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