PARIS (Reuters) – French power and engineering firm Alstom (ALSO.PA ) said it would ramp up cost cuts and asset disposals after a drop in first-half orders and net income, and a heavy cash outflow.
Alstom, which makes trains, wind turbines and turbines for power stations, set a target of 1 to 2 billion euros of disposals by December 2014 through the possible sale of a minority stake in its transport unit and the disposal of non-strategic assets.
“In the current low-growth environment, we need to further reinforce our competitiveness,” Chief Executive Patrick Kron said in a statement on Wednesday.
Like rivals Siemens (SIEGn.DE ) and ABB (ABBN.VX ), Alstom is facing a dearth of large orders, particularly in thermal power, as utilities delay spending in a sluggish global economy.
“During the first six months of 2013/14, the macro-economic conditions have remained challenging with a sluggish economic environment in mature countries and slower growth in some emerging countries,” Alstom said in a statement.
Alstom’s free cash flow turned positive in the last fiscal year after two years of outflows, and Kron has made cash generation a priority. But the outflow was 511 million euros in the six months to September 30.
The group said it expected annual cost savings to rise to 1.5 billion euros ($2.02 billion) by April 2016, with restructuring costs of around 150 to 200 million per year.
The group confirmed its full-year guidance for positive free cash flow, low single-digit organic sales growth and a stable operating margin.
First-half net profit fell 3 percent to 375 million euros on sales of 9.73 billion, the company said. Analysts polled by Thomson Reuters I/B/E/S had on average expected net profit of 352 million on sales of 9.59 billion.
The group booked 9.4 billion euros of orders, down 22 percent year-on-year.
(Reporting by Natalie Huet- Editing by James Regan)
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