ALSTOM: First Half Results 2000/01 1 April - 30 September 2000
8 November 2000
ALSTOM: First Half Results 2000/01 1 April - 30 September 2000
Continuing progress
PARIS, Nov. 8 -- New Profile: First Half reflects the full integration of Power since 11
May 2000 and the completion of Industry disposals. 80% of total
activity now focused on energy and transport infrastructure markets.
-- First Half Performance: Record high order backlog at eur 36.9 billion
(including eur 5 billion of long-term maintenance contracts). Orders
received up to eur 10,814 million and sales up to eur 10,651 million.
Operating Income amounted to eur 494 million (vs eur 365 million First
Half 99/00). The 4.6% operating margin is the combined result of an
overall 5.9% margin excluding Power and a 3.2% margin in Power
-- GT24/26 gas turbine remedial actions: modifications are being designed
and implemented progressively across the fleet; the first modified
machines are operating; settlement discussions with customers are
progressing; an additional eur 903 million provision corresponding to
this issue is included in the First Half accounts through the purchase
method applied to the integration of Power.
-- Net Income: eur 103 million. The eur 227 million net income recorded
during the First Half last year included a eur 158 million exceptional
net capital gain after tax.
Commenting on the results presented to the Board on 6 November 2000,
Pierre Bilger, Chairman and Chief Executive Officer of ALSTOM SA
stated:
"Focused at 80 % on Power, Transmission & Distribution and Transport,
ALSTOM has continued to deliver progress during the First Half 2000/01. The
actions to remedy the difficulties encountered with the introduction of the
GT24/GT26 gas turbines are proceeding actively and the corresponding provision
established. In line with the First Half, the full year 2000/01 is expected
to show new progress in orders and operating margin compared to last year.
This gives credit to our 6 % operating margin target for 2002/03 which I
confirm."
Global Review
Orders and Sales
Breakdown by Sector
In eur millions Orders Received Net Sales
First Half First Half First Half First Half
2000/01 1999/00 2000/01 1999/00
Power 4,647 2,453 5,091 1,834
Transmission &
Distribution 1,578 1,275 1,276 1,272
Transport 2,616 1,939 1,767 1,933
Contracting 1,491 1,153 1,160 1,053
Power Conversion 337 224 279 316
Marine 36 639 933 722
Others 109 531 145 401
Total 10,814 8,214 10,651 7,531
During the First Half ended 30 September 2000, ALSTOM received orders
amounting to eur 10,814 million compared to eur 8,214 million received during
the same period last year.
This 32% increase is mainly due to the full consolidation of Power. All
Sectors reported double digit growth on a comparable basis, with the exception
of Power (where strong growth in Gas and Customer Service was more than off-
set by lower orders in Steam as compared to the high level recorded last year)
and Marine (where no major orders were recorded during the period). This
positive overall trend bears witness to the continuing sustained growth in
energy and transport infrastructure markets world-wide.
Consolidated Net Sales in the First Half amounted to eur 10,651 million,
an increase of 41% compared to the same period last year, largely as a result
of the full integration of Power. Sales in Transmission & Distribution
remained stable on a comparable basis following the lower level of order
intake last year whilst Transport recorded a decrease in sales as expected due
to the phasing of major train deliveries. Marine recorded 29% growth in sales
as a result of three major cruise-ship deliveries completed between April and
September.
Breakdown by Geographic Region
In eur millions Orders Received Net Sales
First Half First Half First Half First Half
2000/01 1999/00 2000/01 1999/00
European Union 4,874 4,158 4,300 4,186
France 1,769 1,386 1,342 1,891
UK 955 846 1,186 767
Germany 738 807 819 717
Rest of Europe 549 301 499 359
North America 1,687 912 2,833 886
Central and South
America 1,311 777 744 632
Asia-Pacific 1,591 1,462 1,594 1,006
Africa-Middle East 802 604 681 462
Total 10,814 8,214 10,651 7,531
The geographic breakdown of the activity during the First Half has been
influenced by the full integration of Power, leading to a more balanced
geographic split for ALSTOM as a whole.
In the European Union (45% of total orders), the Company is experiencing
buoyant market conditions. The 17% growth in orders received as compared to
the same period last year is mainly due to strong growth in France, notably in
Transport which is benefiting from a increase in investment by French railway
operator, SNCF, as well as in the UK where demand for transmission equipment
has been particularly strong.
North America represented 16% of ALSTOM's total order intake, as compared
to 11% one year ago. This is mainly due to the full integration of Power with
its important presence in the region (24% of total Power orders compared to
12% during First Half 1999/00) but is also the result of increased activity in
Transmission & Distribution, particularly as ALSTOM continues its involvement
in the rapidly growing energy management markets in the region, as well as in
Transport, which continues to record a steady level of maintenance contracts
in the USA (renovation of subway cars, Chicago).
The strong growth recorded in Central and South America (12% of total
orders, up 69% compared to same period last year) is due to a number of major
orders recorded by Power in Mexico (first phase of the Tamuin steam power
plant, Monterrey III combined-cycle plant) and Brazil (turbines and generators
for Itaipu and Porto Primavera hydro power plants) as well as the long-term
railway infrastructure maintenance contract awarded to Transport in Mexico.
In Asia Pacific (15% of total orders), orders received increased by
9% compared to the same period last year. Following a period of lower level
of investment in transmission equipment in the region, signs of market
recovery have been confirmed with Transmission & Distribution recording a
number of major orders during the First Half (500 MW HVDC transmission line in
India and a major substation contract in Singapore). Transport recorded
further commercial success in Australia with an order for 38 CITADIS(TM) trams
and the corresponding long-term maintenance contract.
The 33% increase in Africa/Middle East (7% of total orders) is mainly due
to the order awarded to Transport during the period for the supply of
100 diesel locomotives to Iran.
Operating Income and Margin
In eur millions Operating Income Operating Margin
H1 H1 FY H1 H1 FY
00/01 99/00 99/00 00/01 99/00 99/00
Power 165 73 117 3.2% 4.0% 2.6%
Transmission &
Distribution 103 108 233 8.1% 8.5% 8.8%
Transport 106 115 231 6.0% 5.9% 5.6%
Contracting 69 46 91 5.9% 4.4% 4.0%
Power Conversion 27 5 18 9.6% 1.6% 2.7%
Marine 52 52 71 5.6% 7.2% 5.4%
Others (28) (34) (32) -- -- --
Total 494 365 729 4.6% 4.8% 4.5%
Operating Income amounted to eur 494 million compared to eur 365 million
for the same period last year. This overall increase of 35% is mainly due to
the full integration of Power.
The 4.6% operating margin is the combined result of an overall 5.9% margin
for the other Sectors, excluding Power and a 3.2% margin in Power -- in line
with the Sector's previously announced target.
Currency Effect
Orders, sales and operating income have been positively impacted during
this First Half by the translation effect between Euro and non-Euro
currencies. Overall this impact amounts to approximately +6% for each of
orders, sales and operating income, with Power benefiting most as a result of
its wider presence in non-Euro zone countries, particularly the UK and the
USA.
Net Income
Net Income decreased from eur 227 million to eur 103 million. Net income
in First Half 1999/00 included an exceptional after-tax net gain of
eur 158 million (eur 88 million before tax) relating to the disposal of the
heavy duty gas turbine business to General Electric.
Net Income recorded for the First Half 2000/01 now reflects the new
configuration of the Company taking into account the full integration of Power
and the total of approximately eur 2.7 billion paid to ABB in the two separate
transactions which led to ALSTOM's 100% ownership of this business and which
the Company funded mainly by additional debt.
This has led to an increase in financial expenses incurred during the
period, eur 46 million compared to financial income of eur 2 million during
First Half 1999/00.
Restructuring costs have remained stable at eur 43 million, following the
exceptionally high level of costs incurred during the Second Half 1999/00.
The significant increase in pension costs (eur 74 million compared to eur
30 million) is due to the full integration of Power and the resulting higher
number of employees, particularly in Germany and the USA.
Income tax for the period April to September 2000 amounted to
eur 79 million, an effective tax rate of 23%. This is due to continuing tax
optimisation and the positive impact of the recognition of deferred tax assets
mainly in France, Germany, Spain, Brazil and the USA. It is expected that the
on-going reorganisation arising from the integration of Power will enable the
Company to continue to recognise a lower than normal tax rate, at least during
the current year.
Goodwill amortisation amounted to eur 148 million compared to
eur 87 million during First Half 1999/00. This significant increase is
mainly attributable to the full integration of Power and the related purchase
accounting.
Balance Sheet
At 30 September 2000, shareholders' equity amounted to eur 2,012 million,
eur 2,061 million including minority interests. The increase compared to the
situation at 31 March 2000 is due to the combined effect of the capital
increase of eur 33 million following the Company's second employee share
purchase scheme finalised in August 2000 and the increase in net income
reduced by the dividend for the 1999/00 financial year amounting to
approximately eur 117 million paid on 11 September 2000.
In addition, during the First Half, ALSTOM issued subordinated perpetual
notes for a total amount of eur 250 million.
At eur 6,672 million, provisions have increased significantly as compared
to the situation at 31 March 2000 (eur 4,262 million). This is mainly due to
the effect of the full integration of Power -- partly the full consolidation
of provisions previously recorded on the former joint company's balance sheet
and only 50% consolidated by ALSTOM prior to 11 May 2000 as well as the
additional eur 903 million provision corresponding to the GT 24/26 gas
turbines accounted for in the First Half 2000/01.
The GT24/26 turbines are based upon ABB-developed technology acquired by
ALSTOM in May 2000 when the Company took full control of ABB ALSTOM POWER, and
the technical issues concern contracts already recorded in the order book at
the date of acquisition. Consequently, in line with French GAAP purchase
accounting practices, the corresponding provision has been included in the
fair value of the net worth of the final 50% share of ABB ALSTOM POWER
acquired by ALSTOM and thus in the calculation of the related acquisition
goodwill.
The acquisition goodwill associated with the final 50% acquisition
amounted to eur 2,009 million and will be amortized over 20 years from 11 May
2000. This is the main contributing factor to the increase in goodwill
recorded on the balance sheet at 30 September 2000 (eur 6,312 million compared
to eur 3,810 million as at 31 March 2000). Amounts associated with the full
harmonisation of accounting principles, review of properties, current assets
and liabilities are also included in the fair value calculation and are
subject to adjustments when the assumptions relating to the valuation are
finalised.
Taking into account long-term deposits of eur 368 million, the Company had
net financial debt at 30 September 2000 of eur 960 million leading to a ratio
of net debt/market capitalisation of 18%, a gearing of 47% and interest
coverage of 13.5.
Cash Flow
Net debt increased during the First Half by eur 189 million.
Net cash provided by operating activities amounted to eur 780 million,
eur 282 million of which represents a decrease in working capital
requirements.
The Company has continued its initiatives to increase cash awareness
throughout the organisation in order to adapt both to its new financial
profile and to the new generally lower levels of advance customer payments
than was the case previously.
In this context, the Company has been actively managing its balance sheet,
in particular with a view to optimising its working capital. For example, the
spectacular growth in Marine's activity over the past three years and its
consequences on working capital requirements in an industry where typically
advance payments represent no more than 15% of the total contract value, has
led the Company to set up, during the First Half, an asset-backed financing
programme for a total of approximately eur 500 million covering the period of
construction of three large cruise-ships currently on order from RCCL. This
and similar initiatives generated additional cash of approximately
eur 750 million during the period.
The main operating cash expenses incurred during the First Half were
related to restructuring (eur 228 million, mainly in Power) and the
exceptional operating expenses associated with the GT24/26 gas turbine
remedial actions (eur 300 million). Of the other Sectors, Transport was the
main cash contributor.
Net cash used in investing activities amounted to eur 1,319 million. This
is mainly due to the cash payment of eur 1,250 million made to ABB on 11 May
2000 in relation to ALSTOM's acquisition of ABB's 50% share in ABB ALSTOM
POWER. Capital expenditure amounted to eur 298 million.
Cash flows from financing activities of euro 350 million comprise mainly
eur 33 million related to the capital increase which took place during the
First Half, eur 250 million related to the issue of subordinated perpetual
notes and the payment on 11 September 2000 of a dividend of eur 117 million
corresponding to the financial year ended 31 March 2000.
Human Resources
As at 30 September 2000, ALSTOM employed a total of 139,060 people
worldwide (full-time equivalent) as compared to 120 678 people at 31 March
2000.
This increase results primarily from the inclusion of 100% of Power
employees, formerly included on a 50% basis.
Over 4 000 employees, mainly in Power, have left the Company during the
First Half as a direct result of current restructuring programmes.
Outlook
For the full year 2000/01, in the context of sustained growth in energy
and transport infrastructure markets, management expects to see confirmation
of the strong growth in order intake reported during the First Half.
The Company's 6% operating margin target for 2002/03 is confirmed and
management expects to report further progress towards this target at the end
of the Company's financial year as compared to full year 1999/2000.