Zurück
Sun 21 Nov 2004
Alstom can only look with envy at Vivendi's revival
THREADNEEDLE
REPAIRING wrecked companies is a tricky task, whether they are in fashionable businesses like telecoms, or deeply unfashionable metal-bashing. In France, it is even more difficult.
But when Alstom chief executive Patrick Kron heads for work in the morning, he must envy Vivendi Universal boss Jean-René Fourtou, who at least has the worst behind him.
After a better than expected third quarter, Fourtou is telling the world that Vivendi is on course to achieve net income of more than 1.2bn this year, some 20% ahead of earlier expectations.
Kron, meanwhile, is still sweating to convince people that Alstom, the engineering group that received a 2bn bail-out from its government and shareholders in July, has enough cash to meet its commitments over the coming 20 months.
On the face of it, the trend is positive. In the half to September 30, Alstom, which built the French TGV high-speed train, the Queen Mary II and a good chunk of the world’s power stations, succeeded in reversing an order slump triggered by its financial crisis.
New orders booked totalled 8.4bn, up 51% on the first half of 2003/4, adjusted for disposals. The intake comfortably exceeded sales, down 12% on a comparable basis to 6.4bn. With a total order backlog of 27.1bn, Kron says the company has the next two years’ sales in the bag.
After shedding 6,300 workers, out of a planned 8,400, the company has significantly reduced costs, more than doubling its operating margin to 3.6%. But Alstom still owes 2.4bn and the cost of debt servicing, together with 122m of restructuring charges, more than consumed Alstom’s operating income of 233m.
On top of which, it faced a further 206m cash outflow to settle claims from operators of its GT24/GT26 power station gas turbines. The poor performance of the turbines, together with part-financing the cruise ships it built, were the two chief reasons the company got into trouble in the first place.
Kron says that of the 76 turbines sold, 75 are in operation and the last is commissioning. Commercial settlements have been concluded for 65 machines, of which 50 are now unconditional.
Nonetheless, Alstom still recorded a net loss of 315m, down from 624m, but still causing an outflow of free cash totalling 294m.
Kron says the cash outflow should finally turn positive in the second half of 2006, when he is targeting operating margins of 6%. That’s a long ride for shareholders in an uncertain world, though the track is underpinned by the French government, which now has 21.4% of the equity.
On the other hand, investors in Vivendi Universal who have held on since Fourtou took command are at last set to receive a dividend, as well as benefit from a significant share price recovery.
In the quarter to end-September, the telecoms to entertainment conglomerate achieved net income of 776m, against 131m in the same months last year. With net debt slashed to 5.5bn and cashflow of 3.85bn, Vivendi is clearly out of the woods.
The profit engine remains Vivendi’s 56% of SFR Cegetel, but Fourtou has also turned around Universal Music Group and is making progress with Vivendi Universal Games, the video games arm.
Alstom can only look with envy at Vivendi's revival
THREADNEEDLE
REPAIRING wrecked companies is a tricky task, whether they are in fashionable businesses like telecoms, or deeply unfashionable metal-bashing. In France, it is even more difficult.
But when Alstom chief executive Patrick Kron heads for work in the morning, he must envy Vivendi Universal boss Jean-René Fourtou, who at least has the worst behind him.
After a better than expected third quarter, Fourtou is telling the world that Vivendi is on course to achieve net income of more than 1.2bn this year, some 20% ahead of earlier expectations.
Kron, meanwhile, is still sweating to convince people that Alstom, the engineering group that received a 2bn bail-out from its government and shareholders in July, has enough cash to meet its commitments over the coming 20 months.
On the face of it, the trend is positive. In the half to September 30, Alstom, which built the French TGV high-speed train, the Queen Mary II and a good chunk of the world’s power stations, succeeded in reversing an order slump triggered by its financial crisis.
New orders booked totalled 8.4bn, up 51% on the first half of 2003/4, adjusted for disposals. The intake comfortably exceeded sales, down 12% on a comparable basis to 6.4bn. With a total order backlog of 27.1bn, Kron says the company has the next two years’ sales in the bag.
After shedding 6,300 workers, out of a planned 8,400, the company has significantly reduced costs, more than doubling its operating margin to 3.6%. But Alstom still owes 2.4bn and the cost of debt servicing, together with 122m of restructuring charges, more than consumed Alstom’s operating income of 233m.
On top of which, it faced a further 206m cash outflow to settle claims from operators of its GT24/GT26 power station gas turbines. The poor performance of the turbines, together with part-financing the cruise ships it built, were the two chief reasons the company got into trouble in the first place.
Kron says that of the 76 turbines sold, 75 are in operation and the last is commissioning. Commercial settlements have been concluded for 65 machines, of which 50 are now unconditional.
Nonetheless, Alstom still recorded a net loss of 315m, down from 624m, but still causing an outflow of free cash totalling 294m.
Kron says the cash outflow should finally turn positive in the second half of 2006, when he is targeting operating margins of 6%. That’s a long ride for shareholders in an uncertain world, though the track is underpinned by the French government, which now has 21.4% of the equity.
On the other hand, investors in Vivendi Universal who have held on since Fourtou took command are at last set to receive a dividend, as well as benefit from a significant share price recovery.
In the quarter to end-September, the telecoms to entertainment conglomerate achieved net income of 776m, against 131m in the same months last year. With net debt slashed to 5.5bn and cashflow of 3.85bn, Vivendi is clearly out of the woods.
The profit engine remains Vivendi’s 56% of SFR Cegetel, but Fourtou has also turned around Universal Music Group and is making progress with Vivendi Universal Games, the video games arm.
