Alstom Says Emerging Markets to Bolster Order Growth
By Francois de Beaupuy - Jan 20, 2011 7:36 AM ET
Alstom SA, the world’s third-largest power-equipment maker, said growth in orders may accelerate after gaining 30 percent in the fiscal third quarter, helped by an acquisition and rising demand in emerging markets.
The value of contracts won in the three months through December jumped to 5.49 billion euros ($7.4 billion) from 4.22 billion euros a year earlier, Levallois-Perret, France-based Alstom said today in a statement. Revenue gained 12 percent to 5.24 billion euros, compared with an average analyst estimate of 5.32 billion euros.
“These good numbers were supported by the strong commercial performance in emerging countries, which accounted for 60 percent of the total amount of orders received during the quarter,” Chief Executive Officer Patrick Kron said on a conference call.
The proportion of new orders from the Asia-Pacific region, Africa, the Middle East and Latin America doubled to 47 percent of total contracts in the first nine months of the fiscal year from 23 percent a year earlier. Alstom expects further “momentum” as agreements are signed this quarter on supplying 800 million euros in locomotives to Kazakhstan and building a 250 million-euro power plant in Singapore, Kron said.
Alstom rose as much as 1.61 euros, or 4 percent, to 41.47 euros, the highest intraday price since Aug. 19, and was up 3.7 percent as of 1:35 p.m. in Paris trading. The stock has gained 15 percent this year.
Margins and Jobs
In a bid to limit the drop of Alstom’s operating margin to within a range of 7 percent to 8 percent of sales for the two fiscal years through March 2012, Kron said in October that he planned to cut about 4,000 jobs at sites that make coal- and gas-fired power equipment as utilities in Europe and the U.S. delay investments.
Kron reiterated the margin target today and said Alstom will report positive free cash flow in the second half.
Third-quarter orders for power equipment and services rose 6.9 percent to 2.84 billion euros, helped by contracts for gas- fired plants in Singapore and India, as well as renovation and maintenance contracts for French nuclear plants.
Pricing Pressure
Demand in developed markets “remains soft,” Kron said. Pricing for power systems, which was under some pressure in the first half, has stabilized, Kron said.
Sales contracts at the power-grid unit purchased from Areva SA in June amounted to 1 billion euros in the quarter. Alstom confronted pricing challenges in China, where “we face significant competition from domestic competitors,” he said.
Alstom, which makes TGV high-speed trains, competes with companies including Zurich-based ABB Ltd. and Munich-based Siemens AG in power generation, distribution and transportation.
Orders for rail equipment and systems increased 3.9 percent to 1.63 billion euros, helped by contracts to supply high-speed trains to Morocco and subway cars to Montreal, Alstom said.
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