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Shares of the French train maker Alstom crashed as much as 38%, and its bonds fell the most on record on Thursday, following the company's disclosure of preliminary financial information indicating a significant decline in its free cash flow projections, attributed to rising inventories.
The results showed Alstom's free cash flow had plunged from -45 million euros to a whopping -1.15 billion euros. It now expects negative 500-750 million euros for the full year, compared with earlier forecasts that were "significantly positive."
2024 YEAR FORECAST
Alstom has the world's most extensive portfolio of components for the rail sector. This news concerns Wall Street analysts who warn that a capital raise could be nearing.
Deutsche Bank analyst Gael de-Bray told clients the warning is a "major blow" to top executives' credibility. The analyst sees a capital increase that is "increasingly likely" due to the troubled $5.5 billion acquisition of Canadian manufacturer Bombardier.
Shares of Alstom trading on the Paris Stock Exchange crashed 35%. Biggest one day crash in two decades.
Bonds of the French train maker due 2029 sank more than 3% - the most on record - to about 78 cents on the euro.
Alstom blamed surging inventories on supply chain snarls in the US and Europe:
This, combined with tight supply chain conditions, resulted in a significant increase in the level of inventories and contract assets built in order to avoid production disruption and delivery delays during the first half of the year, particularly in Americas and in Europe.
Here's what other Wall Street analysts are saying (courtesy of Bloomberg):
The French government will likely intervene if the situation worsens.
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