By Olivier Sorgho
(Reuters) -French train maker Alstom (EPA:ALSO) is considering a capital increase and is seeking asset sales worth up to 1 billion euros ($1.09 billion) to bolster its balance sheet, sending its shares down 15%.
The company also flagged some 1,500 job cuts in an attempt to reassure investors after it forecast in October a negative free cash flow of 500 million-750 million euros for the year to March 2024.
The maker of France's TGV high-speed trains has had about $4.5 billion wiped off its market value this year - almost half its market capitalisation.
Alstom's shares closed down 15% at 12.04 euros in Paris on Wednesday, off an earlier low of 11.03 euros.
Chairman and CEO Henri Poupart-Lafarge said that while demand remains sustained, the group's commercial performance had softened.
"The negative free cash flow of Alstom during this first half is a clear call for change," said Poupart-Lafarge, who will step down as chairman, but remain chief executive.
Poupart-Lafarge said that while the group was considering a capital increase, it was not the preferred option. Whether the company proceeded down that track would depend on the success of asset sales, he told analysts.
"We felt with the board that there is a risk that this (asset sales) would not be sufficient," he said.
It was not immediately clear which assets would be put up for sale and Alstom declined to detail which assets were in the crosshairs.
Only last month, the group's chief financial officer, Bernard Delpit, ruled out the need for a capital increase, but did flag the possibility of offloading parts of the business.
Citi analysts estimated the capital increase could be up to 1 billion euros and said the company's stock could remain volatile until there was a decision.
The Caisse de dépôt et placement du Québec (CDPQ) pension fund, Alstom's largest individual shareholder with a 17% stake, late on Wednesday welcomed the company's action plan.
"We support this and will follow its implementation closely", CDPQ said in an emailed statement.
French state-backed investment bank Bpifrance, the group's second-largest shareholder which holds 7.5%, declined to comment on Wednesday's announcement.
DEBT REDUCTION
Redburn Atlantic analyst James Moore said the group had an array of disposal options.
"These would likely include, but are not limited to, their 13 Chinese joint ventures and the commodity freight side of the GE signalling business,” he said in an emailed comment.
Alstom is the world's second-biggest train maker after China's state-owned CRRC and has contracts on its order books from Britain for its HS2 high-speed railway and for the largest train tender in Danish rail history.
Brussels in 2019 scotched a merger of rail assets belonging to Alstom and Germany's Siemens that France had hoped would create a European industrial champion when rail companies globally were looking to consolidate and reduce costs.
Two years later Alstom completed the purchase of Bombardier's rail business. It has been struggling with problem contracts inherited from that acquisition and is facing some short-term challenges.
A successful implementation of Alstom's balance-sheet plan through asset sales and equity measures "should help improve Alstom's credit profile," said Nathalie Tuszewski, analyst at rating agency Moody's, in an email.
Alstom said it plans to cut its net debt by 2 billion euros by March 2025. As of Sept. 30, it had a net debt of 3.4 billion euros. The group said it would propose that no dividend be paid for the current fiscal year.
Alstom said the assets disposal program aimed to generate proceeds of between 500 million and 1 billion euros.
It also said that Poupart-Lafarge would step down as chairman, but remain chief executive. Alstom's board will propose Philippe Petitcolin - a former CEO of Safran (EPA:SAF) - as new chairman.
CDPQ in its statement welcomed Petitcolin's arrival.
($1 = 0.9201 euro)