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The Alstom published financial results after the COVID-19 pandemic

The Alstom published financial results after the COVID-19 pandemic
photo: Archives/Alstom
15 / 11 / 2020

The French national company of ALSTOM recorded a decline in orders and sales in the first half of 2020/2021. This is due to the COVID-19 pandemic. However, the company expected these declines and was prepared for them. At present, the numbers are returning to normal.

The Alstom saw a strong 46% drop in organic orders. From 4.6 billion euros to 2.65 billion euros. However, the company expected this decline, due to the consequences of the pandemic. To illustrate, between 1st of April 2020 and 30th of September, the Alstom's revenue was estimated at EUR 3.5 billion. This is, therefore, an organic decrease of 13%. This decline was due to a pandemic situation, which slowed down several processes. In the first quarter, sales were 1.5 billion euros, in the second quarter already 2 billion.

However, backlogs amounted to € 40 billion. According to this it is possible to estimate that future sales will be good. The ratio of the account book climbed to 0.8. This is a consequence of the COVID-19 pandemic.

If we look at the area of railway stock, in the first quarter of 2020/21, sales in this area reached EUR 1.7 billion. This is an 8% organic drop. The results were affected by the slowdown in Europe. Revenues from the field of signaling reached 691 million euros. There is an organic decline here as well. This time by 2%. In the area of ​​services, there was also a decrease of 5%. In the area of systems sales, revenue dropped to 452 million euros, while the organic decline was 42%.

In the second quarter, organic growth was recorded in all the areas mentioned, even compared to the second quarter of 2019/2020. The only exception was the area of ​​systems, where the decline continued to 35%. Comparing the second quarter of 2020/2021 and 2019/2020, we find that the railway stock sector recorded 10% growth, services 8% and signaling 3%.

The Alstom's Earnings Before Interest and Taxes (The EBIT) amounted to EUR 263 million. This corresponds to a margin of 7.5% in the first half of the year. In the same period a year earlier, the margin reached 7.7%. The company's margin is thus very resilient due to the COVID-19 pandemic. This was mainly due to the improvement of the cost-to-sales ratio, the optimization of production capacities, the increase in industrial activity and the control of overhead production costs.

If we focus on the Alstom's net income from ongoing projects, it has reached 161 million euros. In 2019/2020 it was 213 million euros. Here, the impact of the COVID-19 pandemic is visible.

However, the Alstom was successful in acquiring new projects. These include, for example, ordering infrastructure as part of a modernization project in Romania, the Nantes tram line in France. Other projects were acquired by the Alstom company in Mexico or Taiwan.

To get an overview, we also need to focus on acquisitions. During the first half of the fiscal year 2020/2021, the Alstom bought the Bombardier Transportation. This was followed in September by an agreement to sell and buy the Bombardier Inc. and Caisse de dépôt et placement du Québec. The transactions will close in the first half of 2021. Net revenue is expected to be up to € 5.3 billion. The Alstom also acquired the IBRE. It deals with the development and production of steel brake discs for high-speed, intercity, regional and suburban trains, trams and metro. The IBRE had a turnover of approximately EUR 10 million in 2019. Due to the IBRE acquisition, the Alstom has strengthened its internal capabilities in railway braking systems.

Despite the pandemic, the Alstom has also been successful in innovation. The company has maintained its innovative know-how and the sustainability of research and development costs, which reached 125 million euros, i.e. about 3.5% of sales. During the first quarter, the Alstom entered into several agreements in Europe to shape the future for hydrogen-powered trains. An automatic train control (ATO) project is also planned, which should start in 2021In June 2020, the Alstom introduced a new version of the Mastria multimodal control system.

The Alstom's financial results have seen several declines due to the COVID-2019 pandemic. In the second half of this year, however, it stabilized and, in many areas, also performed better than in the same period in 2019. The Alstom acquired major railway market companies in its acquisition portfolio. In addition, there is a great benefit of innovative plans for the railway.  This means new technologies that correspond to current trends. Thus, the year 2020/2021 is a symbol of many challenges for the Alstom.