Alstom revises financial outlook

Alstom, a major French rail equipment manufacturer, has revised its financial goals after ongoing delays in producing its Coradia Max trains for Germany. The company now expects an operating margin of about 1% for the fiscal year 2026-2027, a sharp drop from the previously projected 6.5%. This change follows poor performance in the first half of the year, primarily due to production challenges in the Coradia Max program.

First half results show losses

For the first six months of the fiscal year, Alstom reported an operating margin of approximately -4%, a significant decline from the expected 6.4%. The company produced 1,800 train cars during this period, an 8% decrease compared to the same period in the previous year. These results reflect production issues on several industrial lines, including a halt in the first quarter due to technical problems with the Coradia Max trains.

German contracts face major delays

The problems are concentrated on six major contracts in Germany, totaling about 5 billion euros. These contracts involve two-level regional trains meant to modernize several transport networks. Production of these trains was halted in July 2026 after technical issues were discovered. A management team reassessed the projects and questioned the reliability of the original schedules, pushing back the first deliveries from 2027 to 2028.

Northern German orders delayed

Orders from Lower Saxony, Bremen, and Schleswig-Holstein include 76 trains intended to replace aging regional fleets. These trains were originally scheduled to arrive by 2027 but are now expected in 2028. The affected routes connect major cities such as Hanover, Bremen, Osnabruck, and Bremerhaven, serving about 40,000 passengers daily. Until the new trains arrive, operators must use replacement equipment and adjust their operations accordingly.

Schleswig-Holstein's delayed trains

In Schleswig-Holstein, the region is expecting 42 new trains, with deliveries now set for 2028. The project includes long-term maintenance commitments for 30 years, and the European Investment Bank has provided a 250 million euro loan to support the purchase. Delays have also been caused by authorization and testing procedures in Germany and the Czech Republic, as transport authorities are waiting for vehicles that meet reliability standards.

Financial impact of delays

The delays have significantly affected Alstom's finances. Free cash flow for the first half of the fiscal year is estimated at -1.25 billion euros, which is less severe than the 1.5 billion euro cash consumption initially expected. However, the company now projects a negative free cash flow of about 1.5 billion euros for the entire year, compared to a previously anticipated positive figure.

Alstom's response to challenges

In response to the setbacks, Alstom’s CEO, Martin Sion, has called for a thorough identification and reporting of risks and opportunities at the project level. The company is mobilizing dedicated teams on critical projects like Coradia Max and conducting a detailed review of its organizational and operational models. Decisions on these reviews are expected by early 2027. Alstom has also approved a plan to reduce debt by 2 billion euros, relying on the sale of non-essential assets.

Strained relationship with German authorities

The delays have strained Alstom’s relationship with German authorities, who have expressed frustration over the company’s reliability. The regional transport ministry in Baden-Württemberg stated that trust in Alstom has been significantly damaged, and the administration is demanding that the company allocate more resources to speed up the delivery of reliable trains.