Alstom boosts recovery with power station sales

14 Nov, 2006

French industrial group Alstom, which makes trains and power-generation equipment, said on Monday that record orders in the energy sector had boosted its recovery, two and a half years after the group came close to collapse.
Net profit in the first half of its financial year shot to 227 million euros (292 million dollars), a leap of 67 percent from the figure for the same period last year, with energy activities providing the brightest spots in Asia, Europe and the United States.
Operating profit in the period, which runs April to Septmber, rose by 27 percent to 413 million euros, while sales increased by eight percent to 6.608 billion euros, the company said. "The level of orders registered over the period was remarkably high," with an increase of 46 percent, Alstom chairman and chief executive Patrick Kron noted in a statement.
The company added that "demand was particularly strong in the power market, driven by the economic growth in Asia, the need to retrofit or replace an ageing fleet and the requirement to comply with environmental regulations, especially in Europe and the US".
The overall Alstom group came close to bankruptcy in 2004 and was the subject of a rescue plan orchestrated by the French state. Alstom received more than 2.0 billion euros in state aid coupled with assistance from creditor banks, but the French government and the company were obliged to accept conditions imposed by EU competition authorities before proceeding.
The group has divested most of its loss-making shipbuilding activities and focused on the energy and transportation sectors. Alstom said that its first-half operating margin rose to 6.3 percent from 5.3 percent 12 months earlier owing to improved profitability in its power generation equipment sector.
It raised its guidance for the key measure to more than seven percent in the 2007-08 fiscal year. Alstom also forecast that sales in its 2006-07 fiscal year would grow by more than 10 percent, up from with a previous prediction of eight percent.
Results in Alstom's transport division were less positive, with orders down by 18 percent "compared to the high level recorded in the first half of 2005-06", Alstom said.
Alstom, which builds the French TGV high-speed train, suffered a setback at the end of October when it lost out on a 4.0-billion-euro contract to build trains for the Paris region. Bombardier of Canada won the deal, which Alstom vowed initially to challenge in the courts but has since accepted.
The blow was softened by a contract in China for 500 freight locomotives, which Alstom is to build with China's Datong Electric Locomotive. Alstom's share of the contract was estimated at 300 million euros. Giving further financial details, Alstom said that it had slashed its debt in half in the six months since April.
Group debt stood at 611 million euros as of September 30, Alstom said, down from 1.25 billion on April 1. The group is now considering acquisitions in Germany, where it intends to compete with the industrial group Siemens, Kron told the daily Suddeutsche Zeitung.

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