Alstom SA · EURONEXT:ALO
Alstom SA — FY2003 Earnings Presentation
49 slides from Alstom SA's earnings presentation, May 14, 2003
Slide 1: Annual Results Fiscal Year 2003
Annual Results Fiscal Year 2003 14 May 2003
Slide 2: Agenda
Agenda l Overview P. Kron l Operational Review N. Salmon l Financial Results Ph. Jaffré l Action plan update P. Kron 2
Slide 3: FY 2002/03
FY 2002/03 l Results in line with guidance given on March 12 l Impacted by GT24/GT26 exceptional provision and Power market downturn l Decisive action plan launched l First tangible results achieved 3
Slide 4: FY 2002/03 Results
FY 2002/03 Results l Orders Received (1) (4)% l Sales (1) + 1% l Operating margin before exceptionals 4.1% 4Exceptional provisions: Ø GT24/GT26: €1,160 m Ø UK trains: €140 m l Net result affected by exceptionals: €(1.38) Bn In line with previous guidance (1) on a comparable basis 4
Slide 5: FY 2002/03 Results
FY 2002/03 Results l Free Cash flow €(1,151) m in FY 02 €(265) m l Economic debt reduced (1) €5.3 Bn in FY 02 €4.9 Bn In line with previous guidance (1) Economic debt = Net debt (including securitisation of future receivables) + Securitisation of existing receivables 5
Slide 6: Action plan update
Action plan update 1 - Increase disposals to €3.0 Bn by March 04 €1.5 Bn secured, 50% of target achieved 2 - Strengthen financial base Secured €1.1 Bn bank facilities Adapted covenants 3 - Improve operational performance Management and organisation renewed Restructuring launched Focus on commercial
Slide 7: Agenda
Agenda l Overview P. Kron l Operational Review N. Salmon l Financial Results Ph. Jaffré l Action plan update P. Kron 7
Slide 8: Market environment
Market environment l Power: 4Abrupt market downturn in new equipment 4Continuing growth in Service l T&D: 4Stable market in transmission 4Difficult market in distribution l Transport: 4Buoyant market l Marine: 4Uncertain cruise market Overall, challenging market environment 8
Slide 9: ALSTOM - actual FY 2002/03
ALSTOM - actual FY 2002/03 € million FY-02 FY-03 Orders 22,686 19,123 (16)% Sales 23,453 21,351 (9)% Backlog 35,815 30,330 (15)% Operating Income (OI) 941 (434) Operating Margin (OM) 4.0% (2.0)% 9
Slide 10: ALSTOM - Comparables
ALSTOM - Comparables* € million H2-02 H2-03 FY-02 FY-03 Orders 8,698 8,586 (1)% 19,959 19,123 (4)% Sales 10,705 10,582 (1)% 21,051 21,351 +1% Backlog 32,995 30,330 (8)% Operating Income 379 (977) 839 (434) before excep. 323 866 Operating Margin 3.5% (9.2)% 4.0% (2.0)% before excep. 3.1% 4.1% *Same S
Slide 11: Power - Comparables
Power - Comparables* € million H2-02 H2-03 FY-02 FY-03 Orders 4,148 3,571 (14)% 10,299 8,602 (16)% Sales 5,864 5,089 (13)% 12,098 10,901 (10)% Backlog 13,835 11,386 (18)% Operating Income 257 (961) 526 (690) before excep. 199 470 Operating Margin 4.4% (18.9)% 4.3% (6.3)% before excep. 3.9% 4.3% *Sam
Slide 12: Power
Power € billion FY-03 Orders Sales Power Turbo-systems 2.0 3.8 Power Service 2.8 2.6 Power Environment 2.6 3.2 Industrial Turbines Business 1.2 1.3 Total Power 8.6 10.9 Note on new Sectors: • Turbo-Systems = Gas Turbine Segment + Steam Power Plants Segment • Environment = Boilers & Environment Segme
Slide 13: Power
Power l Power Turbo-systems: 4Decline of Gas turbine market 4Slowdown in turnkey l Power Service: 4Strong activity in maintenance and retrofit l Power Environment: 4Decline of gas related products partly offset by growth in aftermarket and new coal equipment 4Hydro stable 13
Slide 14: GT24/GT26
GT24/GT26 l Delayed "Recovery package" for customers l Crisis in power market tighter cash constraints on our customers l Liquidated damages l Costs of replacement parts (blades, compressor, ...) Additional €1,160 m provision on GT24/GT26 in FY-03 14
Slide 15: GT24/GT26
GT24/GT26 € million Situation at March 31, 2003 Estimated gross liability: 1,984 Estimated mitigation: 454 Liability: 1,530 Existing provisions: 370 New provisions: 1,160 Provisions: 1,530 15
Slide 16: GT24/GT26: progress
GT24/GT26: progress 1) Implementation of recovery package Ø On schedule 2) Mitigation program Ø Detailed action plan in place 3) Outstanding litigation and settlement negotiations Ø Progressing as expected Ø 61 units with settlements, of which 24 unconditional, 12 in negotiation, 7 in litigation 4)
Slide 17: Power: Drivers for margin improvement
Power Drivers for margin improvement l GT24/GT26 issue resolution l Cost reduction: 4Overhead - new organisation 4Industrial restructuring l Business mix: 4Increase "Aftermarket" activity 4Decrease "Turnkey" capacity 17
Slide 18: T&D - Comparables
T&D - Comparables* € million H2-02 H2-03 FY-02 FY-03 Orders 1,668 1,665 0% 3,602 3,732 +4% Sales 1,914 1,827 (5)% 3,565 3,605 +1% Backlog 2,646 2,694 +2% Operating Income 111 117 +5% 210 227 +8% Operating Margin 5.8% 6.4% 5.9% 6.3% *Same Scope and exchange rate 18
Slide 19: T&D Drivers for margin improvement
T&D Drivers for margin improvement l Product line rationalisation l Industrial re-organisation l Overhead reduction l Focus on growing markets 19
Slide 20: Transport - Comparables
Transport - Comparables* € million H2-02 H2-03 FY-02 FY-03 Orders 2,557 3,112 +22% 5,469 6,412 +17% Sales 2,173 2,733 +26% 3,994 5,072 +27% Backlog 13,540 14,675 +8% Operating Income 7 (41) 83 49 before excep. 99 189 Operating Margin 0.3% (1.5)% 2.1% 1.0% before excep. 3.6% 3.7% *Same scope and exch
Slide 21: UK Trains
UK Trains l Regional Trains 4 Significant difficulties and delays experienced 4 118 of 119 trains now in service 4 Reliability improvement programme continuing l West Coast Mainline 4 Changes to train specification, performance and manufacturing due to track and signaling upgrade 4 15 of 53 trains n
Slide 22: Transport: Drivers for margin improvement
Transport Drivers for margin improvement l Resolve UK trains issue l Leverage good market conditions l Pursue opportunities in signaling and service l Restructure underutilised facilities 22
Slide 23: Marine - Comparables
Marine - Comparables* € million H2-02 H2-03 FY-02 FY-03 Orders 239 137 (43)% 462 163 (65)% Sales 634 843 +33% 1,240 1,568 +26% Backlog 2,928 1,523 (48)% Operating Income 5 8 +60% 47 24 (49)% Operating Margin 0.8% 0.9% 3.8% 1.5% *Same Scope and exchange rate 23
Slide 24: Marine
Marine l High workload in FY-03 and FY-04 l Renaissance: 47 of the 8 former Renaissance cruise ships sold or chartered l Very weak order intake, uncertainty on load for FY-05 and beyond: 4Reduce capacity if no new cruiseship order in FY-04 l Need to participate in industry consolidation 24
Slide 25: ALSTOM - Operating Income (Comparable)
ALSTOM - Operating Income (Comparable*) € million FY-02 FY-03 FY-03 bef. Except. Power 526 (690) 470 T&D 210 227 227 Transport 83 49 189 Marine 47 24 24 Others** (27) (44) (44) Op. Income 839 (434) 866 4.0% (2.0)% 4.1% *Same Scope and exchange rate ** Others include Corporate and International Netwo
Slide 26: Agenda
Agenda l Overview P. Kron l Operational Review N. Salmon l Financial Results Ph. Jaffré l Action plan update P. Kron 26
Slide 27: Main reporting changes
Main reporting changes l Scope: 4South African subsidiary 4Captive insurance company l Accounting: 4Cost of securitisation of future receivables in Net Financial Income 4Deferred tax assets and liabilities shown net 4Financial Debt includes: Preferred shares, Subordinated notes, Securitisation of fu
Slide 28: Income Statement -1-
Income Statement -1- € million FY-02 FY-03 Operating Income 941 (434) Ø Restructuring (227) (268) Ø Pensions (139) (214) Ø Capital gain (loss) 118 (6) Ø Others, net* (142) (67) Ø Intangible amortisation (64) (67) EBIT 487 (1,056) (*) Includes in FY-02 €90 m of Marine vendor financing provisioning 28
Slide 29: Pensions
Pensions € million 3,543 Non recognised: 956 Amortised over 12-15 years 575 Recognised: 2,012 Net provision in Balance Sheet Projected Fair Market Funding Benefits Value of Status 2002/03 Obligation Plan Assets P&L (214) Cash outflow 203 29
Slide 30: Income Statement -2-
Income Statement -2- € million FY-02 FY-03 EBIT 487 (1,056) Ø Financial Income (expenses) (294) (270) Ø Income Tax (10) 241 Ø Minority Interest, and others (36) (12) Net Income before goodwill 147 (1,097) Ø Goodwill amortisation (286) (284) Net Income (139) (1,381) (*) Includes in FY-02 €90 m of Mar
Slide 31: Nominal value of shares
Nominal value of shares l Equity reviewed in ALSTOM SA statutory accounts: 4Write-down of assets from historical numbers 4Statutory equity to be reduced to €350 million l Nominal value to be adjusted to €1.25 from €6 today 31
Slide 32: Customer Deposits and Advances (Comparable)
Customer Deposits and Advances (Comparable*) € million 3,632 3,541 Transport 1,129 1,412 Power 1,908 1,493 Others 595 636 Mar 02 Mar 03 CD&A variation: (2)% in line with FY-03 order variation: (4)% *Same scope and exchange rate 32
Slide 33: Free Cash Flow
Free Cash Flow € million FY-02 FY-03 Cash from operations 341 286 Ø ∆ Working Capital 247* 1,115* Ø CAPEX net (432) (389) Ø Over-financed contracts (607) (222) Free Cash Flow before GT24/GT26 (451) 790 Ø GT24/GT26 cash outflow (700) (1,055) Free Cash Flow (1,151) (265) (*) of which Marine (268) in F
Slide 34: Economic debt
Economic debt € billion GT24/GT26 FCF cash before outflow 5.3 GT24/GT26 0.6 4.9 Securit. (1.1) Acquisitions Other (Existing) 1.0 0.8 Rights 0.4 Issue (0.1) 0.3 Preferred + Disposals (0.2) 0.5 Subordinated 0.5 Proceeds FCF 1.3 Securit. 1.7 (0.3) (Future) Net Debt 2.8 Net Financial 2.1 Debt March 02 M
Slide 35: Existing credit line maturity
Existing credit line maturity TOTAL Jun 03 Sep 03 Dec 03 Mar 04 Mar 05 After Preference shares 205 205 Subordinated notes 250 250 Bonds 1,200 550 650 Syndicated loans 3,227 254 600 400 1,250 723 Bilateral loans 358 75 283 5,240 0 254 600 1,025 1,250 2,111 Securitisation (Future) 1,292 Facilities in
Slide 36: Liquidity at March 03
Liquidity at March 03 € million 7,288 Securitisation (Existing) 357 600 Available lines Uncommitted 399 credit lines 610 Cash available at Holding 2,370 1,160 Liquidity at Subsidiaries Committed Economic credit lines 6,532 4,918 Debt 36
Slide 37: New financial covenants
New financial covenants € billion Actual Covenants Mar 03 Mar 03 Sept 03 Mar 04 Gross economic debt 6.7 < 7.0 < 6.8 < 4.8 Net economic debt 4.9 < 5.3 < 5.5 < 3.6 Net worth* 0.9 > 0.8 > 0.5 > 0.5 Interest cover** NA - - > 1.8x Early repayment of bridge loan and extended credit facilities (€600m + €47
Slide 38: Bonds and Guarantees
Bonds and Guarantees € billion, actual numbers Bonds Backlog 35.8 30.3 32% 31% 11.4 9.5 March 02 March 03 Reduction of bonding levels in line with backlog 38
Slide 39: Vendor Financing
Vendor Financing* € million March 02 March 03 Marine 1,044 933 Ø Renaissance 432 368 Ø Others Marine 612 565 Transport & Others 449 326 Total 1,493 1,259 (*) Off balance sheet + balance sheet figures 39
Slide 40: Asbestos
Asbestos l France and other countries : 4Covered by publicly-funded systems or medical schemes. l USA 4ABB Indemnified cases: Pre -package Chapter 11 of Combustion Engineering Inc. awaiting court approval 4Non ABB cases: Nov. May New Dismissed 2002 2003 Asbestos Cases 80 67 (101) 46 Asbestos Claims
Slide 41: Agenda
Agenda l Overview P. Kron l Operational Review N. Salmon l Financial Results Ph. Jaffré l Action plan update P. Kron 41
Slide 42: 1- Increase disposals to €3 Bn
1- Increase disposals to €3 Bn l Real Estate 4 €267 m in FY02/03 + €138 m April 03 405 4 To be finalised over next few months app. 200 l Businesses 4 Industrial turbines: signed April 03 950 4 Insurance Company: achieved in FY-03 100 4 South African subsidiary: achieved in FY-03 50 4 T&D: preliminar
Slide 43: 2- Strengthen financial base
2- Strengthen financial base l Capital increase 4 To be submitted for approval at 2 July 2003 AGM: ØCapital increase via Rights issue ØMaximum proceeds €600 m 4 Timing of implementation to be defined by Board l Credit lines 4 Agreement on new covenants: done 4 €475 m Deferral: done 4 €600 m Bridge L
Slide 44: 3- Improve performance
3- Improve performance l Management and organisation 4 Renew the management ØExecutive committee renewed done ØNew management in Power done ØNew management in Transport done 4 Implement a more efficient organisation ØPower delayered done ØCorporate Risk Committee chaired by CEO initiated ØInternatio
Slide 45: 3- Improve performance
3- Improve performance l Restructuring €500 m recurring annual savings within two years 4 Corporate + Power HQ Ø170 staff reductions (40%) announced 4 Industrial ØTurbo-Systems: 3,000 staff reductions (30%) announced ØOthers: to be launched progressively in coming months 45
Slide 46: 3- Improve performance
3- Improve performance l Commercial focus 4 Focus on commercial efficiency despite: ØMarket slowdown impacting orders during last period ØCustomer questions on ALSTOM’s future ØTight bonding market 4 Top priority in coming months: commercial initiatives on all fronts to leverage our market positions
Slide 47: 3- Improve performance
3- Improve performance l Significant orders since March 12: 4Gas CC plant in Bahrain €320 m 4CFB Boiler in China €65 m Power 4Hydro plant in Quebec €40 m 4Nuclear plant upgrade in Finland €35 m T&D 4HVDC Sweden-Denmark link €40 m 4100 Coradia - Minuetto trains €320 m Transport 4Barcelona metro Maint
Slide 48: To conclude
To conclude l A clear vision of the future ALSTOM l Defined financial targets 4Sales: €15 Bn 4Operating margin: 6% in 2005/06 4Positive free cash flow 4Economic debt < €2.5Bn by March 2005 Good Progress in Making it Happen 48
Slide 49: www.alstom.com
www.alstom.com