Alstom warns of €1.5bn cash burn, cuts margin

Alstom has sharply revised its fiscal 2026/27 guidance, cutting its adjusted EBIT margin target to around 1% and forecasting free cash flow of negative €1.5 billion for the year. The revised outlook marks a move from previously positive free cash flow expectations and reflects operational and execution issues weighing on profitability and cash generation.

The guidance cut triggered a strong market reaction, with Alstom shares plunging more than 18% on Tradegate after the announcement. The company also outlined a deleveraging objective of around €2 billion by September 2027 as part of broader measures to strengthen its balance sheet.

The lowered outlook follows a weak first half of fiscal 2026/27, when Alstom’s adjusted EBIT margin stood at around -4%, compared with 6.4% in the same period a year earlier. The deterioration was primarily driven by gross margin adjustments on projects executed for and from Germany, notably the Coradia Max platform, which has faced industrialisation challenges and extended homologation timelines.

First-half group sales reached €9.3 billion, representing 3% reported growth and 2% organic growth year on year.

Alstom produced 1,860 cars in the first half, a level described as trending below its planned trajectory. For the full year, car production guidance has been lowered to around 4,000 units, down from a previous range of 4,400 to 4,500 units, aligning with the broader reduction in growth expectations.

Alongside the margin and cash flow revisions, Alstom adjusted its sales outlook, now targeting low- to mid-single digit organic growth for fiscal 2026/27, compared with earlier guidance of around 5%. Despite the operational issues, commercial momentum remained solid, with first-half orders of €11.0 billion, up from €10.5 billion a year earlier, and a book-to-bill ratio of 1.2.

In the second quarter alone, orders reached €8.4 billion, corresponding to a quarterly book-to-bill ratio of 1.8. For the full fiscal year, Alstom continues to expect a group book-to-bill ratio above 1, indicating anticipated order intake in excess of sales.

The new full-year margin target of around 1% is based on an implied adjusted EBIT margin of about 6.5% in the second half of 2026/27. Management has identified execution excellence, particularly on the Coradia Max platform and other German projects, as the top operational priority in order to normalise performance from the next fiscal year.

To address the pressure on cash flow and leverage, Alstom has set a deleveraging objective of around €2 billion by September 2027. The Board has initiated a review of organic and inorganic options to achieve this reduction and maintain a solid investment-grade credit rating.

The company has also reinforced its liquidity position by entering into a new €2.0 billion short-term revolving credit facility with a first-tier international bank, maturing in November 2028. This facility, which is not subject to financial covenants, adds to Alstom’s financial flexibility as it navigates the impact of delayed milestone payments and later-than-anticipated entry into service of major projects, including Coradia Max.