Alstom SA · EURONEXT:ALO
Alstom SA — H1 FY2004 Earnings Presentation
57 slides from Alstom SA's earnings presentation, Nov 13, 2003
Slide 1: Half-Year Results Fiscal Year 2004
Half-Year Results Fiscal Year 2004 13 November 2003
Slide 2: Disclaimer
Disclaimer This presentation is being supplied to you solely for your information and may not be reproduced, further distributed to any other person (whether within or outside your organisation) or published, in whole or in part, for any purpose. This presentation is not an offer to sell securities
Slide 3: Agenda
Agenda z Overview P. Kron z Operational Review N. Salmon z Financial Results Ph. Jaffré z Action plan update P. Kron z The new ALSTOM P. Kron 3
Slide 4: Update on Action Plan since May 2003
Update on Action Plan since May 2003 z €2.5Bn of the disposal programme secured z Progress in GT24/GT26 commercial settlements: no litigation z New actions launched to improve operational performance: – Simplified organisation in Transport – Restructuring plans underway z New financing package annou
Slide 5: H1-04 Results
H1-04 Results z Orders Received at €7.4Bn, down 23% on a comparable basis z Backlog at €27Bn (18 months of sales) z Sales at €8.9Bn, down 9% on a comparable basis z Operating margin at 1.5%, in line with recent guidance z Net loss of €624m z Free Cash flow at €(674)m z Economic debt* reduced to €4.5
Slide 6: Agenda
Agenda z Overview P. Kron z Operational Review N. Salmon z Financial Results Ph. Jaffré z Action plan update P. Kron z The new ALSTOM P. Kron 6
Slide 7: Market environment in H1-04
Market environment in H1-04 z Power Turbo- Systems New equipment market remaining low; z Power Service Sound after-market z Power Environment Healthy but below z Transport record level of last year Difficult cruise- z Marine ships market Overall difficult market conditions 7
Slide 8: ALSTOM - Actuals
ALSTOM - Actuals € million H1-03 H2-03 H1-04 Var H1/H1 Orders 10,537 8,586 7,439 -29% Sales 10,769 10,582 8,854 -18% Backlog 33,611 30,330 27,174 -19% Operating Income 542 (1,049)* 132** - Operating Margin 5.0% (9.9)% 1.5% - *Incl. provisions of €1,160m for GT24/GT26, €140m for Transport UK and €73m
Slide 9: ALSTOM - Comparables
ALSTOM - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 9,677 7,973 7,439 -23% Sales 9,697 9,886 8,854 -9% Backlog - 28,496 27,174 - Operating Income 495 (998)* 132** - Operating Margin 4.8% (10.4)% 1.5% - *Incl. provisions of €1,100m for GT24/GT26, €143m for T
Slide 10: Power Turbo-Systems Comparables
Power Turbo-Systems Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 1,303 444 839 -36% Sales 2,269 1,415 1,211 -47% Backlog - 3,392 3,027 - Operating Income (1,306)* (127) - Operating Margin - - (10.5)% - *Incl. provision of €1,100m for GT24/GT26 at comparable e
Slide 11: Power Service - Comparables
Power Service - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 1,555 1,191 1,368 -12% Sales 1,217 1,265 1,361 +12% Backlog - 2,651 2,860 - Operating Income 380 196 - Operating Margin 15.3% 14.4% - 11
Slide 12: Power Environment - Comparables
Power Environment - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 1,353 1,100 1,042 -23% Sales 1,315 1,593 1,331 +1% Backlog - 3,821 3,452 - Operating Income 213 24* - Operating Margin 7.3% 1.8% - *Incl. provision of €60m for boilers US 12
Slide 13: Transport - Comparables
Transport - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 3,135 3,061 1,672 -47% Sales 2,238 2,682 2,297 +3% Backlog 14,045 14,435 13,795 -2% Operating Income 85 (95)* (37)** - Operating Margin 3.8% (3.5)% (1.6)% - *Incl. provisions of €143m for Transport UK a
Slide 14: Marine - Comparables
Marine - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 26 137 340 - Sales 725 843 822 +13% Backlog 2,229 1,523 1,041 -53% Operating Income 16 8 4 - Operating Margin 2.2% 0.9% 0.5% - 14
Slide 15: T&D - Comparables
T&D - Comparables € million Same Scope and exchange rate H1-03 H2-03 H1-04 Var H1/H1 Orders 1,904 1,620 1,801 -5% Sales 1,635 1,789 1,562 -4% Backlog 2,848 2,623 2,894 +7% Operating Income 98 116 84 - Operating Margin 6.0% 6.5% 5.4% - 15
Slide 16: Corporate
Corporate z H1-04 operating loss at €(26) million versus €(46) million in FY-03 on a comparable basis z On top of the FY-03 OI, Power Sector supported €(25) million of costs now allocated to Corporate after the creation of the three new Power Sectors z Strong action undertaken to reduce overheads at
Slide 17: Operating Income - Comparables
Operating Income - Comparables Same Scope and exchange rate € million H1-03 H2-03 H1-04 Power Turbo-Systems (1,306) (127) Power Service 196 380 Power Environment 213 24 Industrial Turbines 28 14 Sub-total POWER 241 (926) 107 Transport 85 (95) (37) Marine 16 8 4 T&D 98 116 84 Corporate 55 (101) (26)
Slide 18: Agenda
Agenda z Overview P. Kron z Operational Review N. Salmon z Financial Results Ph. Jaffré z Action plan update P. Kron z The new ALSTOM P. Kron 18
Slide 19: Income Statement -1-
Income Statement -1- € million H1-03 H2-03 H1-04 Operating Income 542 (1,049) 132 Restructuring (80) (189) (276) Pensions (97) (117) (138) Capital gain and others (11) (60) 17 Intangible amortisation (32) (35) (31) EBIT 322 (1,451) (296) 19
Slide 20: Pension Costs
Pension Costs € million H1-03 H2-03 H1-04 Defined benefit plan: 79 67 109 Service cost 56 53 51 Expected interest cost 106 105 100 Expected return on plan assets (96) (97) (74) Amortisation of actuarial difference 13 6 32 Defined contributions 18 41 29 Others - 9 - Pension costs 97 117 138 20
Slide 21: Income Statement -2-
Income Statement -2- € million H1-03 H2-03 H1-04 EBIT 322 (1,451) (296) Financial Income (expenses) (128) (142) (220) Income Tax (36) 299 29 Minority Interest, and others (3) (10) (2) Net Income before goodwill 155 (1,304) (489) Goodwill amortisation (144) (140) (135) Net Income 11 (1,443) (624) 21
Slide 22: Financial income
Financial income € million H1-03 H2-03 H1-04 Net interest income (expenses) (140) (124) (152) Foreign currency exchange gain and loss 35 20 (20) Fees and others (23) (38) (48) Financial income (expenses) (128) (142) (220) 22
Slide 23: Free Cash Flow
Free Cash Flow € million H1-03 H2-03 H1-04 EBIT 322 (1,451) (296) Depreciation/amortisation 265 213 159 Change in provisions (128) 1,278 302 Interest and tax (140) (200) (268) Change in Marine working capital 333 130 245 Change in working capital (excl. Marine) (19) 581 (335) Capex, net (160) (229)
Slide 24: Customer Deposits and Advances (excl. Marine)
Customer Deposits and Advances (excl. Marine) € million Variation H1-04 vs H2-03=(379) •Underlying=(144) •Exchange rate=(54) 3,874 •Scope=(181) 3,198 Power 1,950 2,819 1,399 1,226 Transport 1,533 1,410 1,231 Others 391 389 362 Sept 02 March 03 Sept 03 Decrease of CD&A Incl. Marine : CD&A Sept 02=€4,
Slide 25: Trade payables (excl. Marine)
Trade payables (excl. Marine) € million Variation H1-04 vs H2-03=(369) •Underlying=(326) •Exchange rate=(50) 4,859 •Scope=7 4,288 3,919 Sept 02 March 03 Sept 03 Decrease of trade payables Incl. Marine : Trade Payables Sept 02=€5,116m ; March 03=€4,629m ; Sept 03=€4,132m 25
Slide 26: Economic debt
Economic debt € million Free Proceeds Cash from Flow disposals (674) 991 4,918 Other Future 1,292 4,519 Receivables 82 522 Existing Receivables 357 212 3,269 3,785 Net Financial Debt Economic debt March 03 Economic debt Sept. 03 Economic debt reduced by €400 million (*) Economic debt = Net debt (inc
Slide 27: Liquidity on 30 September 03
Liquidity on 30 September 03 € million 6,888 Securitisation (Existing) 212 600 Available lines Uncommitted credit lines 323 443 Cash available at Holding 2,369 1,326 Liquidity at Subsidiaries Committed credit lines 6,353 4,519 Economic Debt 27
Slide 28: Vendor Financing
Vendor Financing* € million March 03 Sept 03 Marine 933 650 ¾ Renaissance 368 344 ¾ Others Marine 565 306 Transport & Others 326 319 Total 1,259 969 Significant reduction of exposure (*) Off balance sheet + balance sheet figures 28
Slide 29: Asbestos
Asbestos z France and other countries: Covered generally by publicly-funded systems or medical schemes. z USA ABB Indemnified cases: Pre -package Chapter 11 of Combustion Engineering Inc. awaiting court approval Non ABB cases: 31 October New Dismissed 31 October 2002 2003 Asbestos Cases 60 120 136 4
Slide 30: Agenda
Agenda z Overview P. Kron z Operational Review N. Salmon z Financial Results Ph. Jaffré z Action plan update P. Kron z The new ALSTOM P. Kron 30
Slide 31: Action Plan
Action Plan z Disposal programme z Financing package z Operational issues z Improvement of performance 31
Slide 32: Disposal Programme
Disposal Programme z Completion of Industrial Turbines sale – Small gas turbines completed on 30 April 2003 – Medium gas turbines and industrial steam turbines on 1st August 2003 z Agreement with Areva on the disposal of T&D signed on 25th September – Enterprise value of €950m, subject to usual clos
Slide 33: Financing package
Financing package z Financing package of €3.2bn announced on 22nd September (subject to EGM’s approval) z All key objectives achieved – Meet EC procedural requirements – Short and medium-term funding needs covered – Contract bonding available to cover needs over the next year – Strong signal to cust
Slide 34: Financing package
Financing package in € million z Equity 1,200 – Capital increase 300 – Bonds redeemable into shares (ORA) 900 z Long-term instruments from French State 500 – 20-year bond convertible into shares if approved by EC 300 – 15-year bond 200 z Medium-term loans 1,500 – 5-year loans (French State) 300 – 5-
Slide 35: Financing package
Financing package Status of implementation: z Capital increase z Bonds redeemable into shares Subject to EGM approval (ORA) z 20-year subordinated bond Subject to EGM approval and convertible into shares (French convertible into shares if State) approved by EC z 15-year bond (French State) To be imp
Slide 36: Financing package
Financing package z 18th November: EGM z After EGM: implementation of capital increase and bonds redeemable into shares; reception of long- term loans z EC review on compatibility of French State’s intervention with Common Market regulations: ALSTOM’s objective to obtain unconditional approval for p
Slide 37: Operational issues - GT24/GT26
Operational issues - GT24/GT26 • Upgrade package tested successfully; currently deployed with positive results • Reliability demonstrated • 72 units in operation, 2 in commissioning, 2 in construction and 4 suspended • 730,000 operating hours Deployment planned over the next 18 months 37
Slide 38: Operational issues - GT24/GT26
Operational issues - GT24/GT26 • Commercial situation: all litigation cases settled 12 March 13 Nov 03 03 Settlements agreed or not needed 61 68 ¾ of which unconditional 20 33 In negotiation 12 12 Litigation with customers 7 0 Total 80 80 • Marketing of new GT24/GT26 re-launched 38
Slide 39: Operational issues - GT24/GT26
Operational issues - GT24/GT26 € million • Cash outflow: 1,055 800 600 394 200 Sept.03 March 03 March 04 March 05 March 06 Cash spent Forecast of cash outflow • Mitigation plan: Mitigation plan on 12 March 03 454 Impact of exchange rate movement (22) Achieved (68) Reduction of exposure (90) Not achi
Slide 40: Operational issues - UK trains
Operational issues - UK trains • Regional trains: all trains delivered but some improvement costs still incurred • WCML: 28 trains out of 53 have been delivered in line with customer’s expectations • UK new build activities to be refocused on service/maintenance after completion of WCML contract (Se
Slide 41: Operational issues - US trains
Operational issues - US trains z Reminder: €73 million (before tax) included in FY- 03 accounts z Internal review by auditors and legal team performed z Following project reviews of Transport USA, new provision of €102 million in H1-04 z Management changed and strengthened; improved internal control
Slide 42: Improvement of performance
Improvement of performance z Launch of major cost reduction programmes – Restructuring (target: €500 million annual savings as of 2006); European level consultation with Unions completed Announced headcount Europe Other TOTAL reductions: countries Power Turbo-Systems 2,850 500 3,350 Power Service 50
Slide 43: Improvement of performance
Improvement of performance z Consistent best-practice in project execution – Reduction in number of execution centers – Assessment and grading of project managers z Stricter risk management (tenders and project execution) – Chairman & CEO heading Risk Committee since March 2003 with new Risk Managem
Slide 44: Agenda
Agenda z Overview P. Kron z Operational Review N. Salmon z Financial Results Ph. Jaffré z Action plan update P. Kron z The new ALSTOM P. Kron 44
Slide 45: Market positions
Market positions* z Power Turbo-Systems – #3 overall – #1 in Steam, Generators, Turnkey Plants z Power Service – #2 overall – Full service coverage (turbines, boilers, environmental, O&M, etc.) z Power Environment – #1 overall – #1 in Utility Boiler, HRSG, Environmental Controls, Hydro z Transport –
Slide 46: Sales - Pro-forma (excl. disposals)
Sales - Pro-forma (excl. disposals) Corporate and Middle others* Power Turbo- East/Africa Marine 4% Systems 6% 11% 17% Asia/Pacific 22% Europe Power 46% Service 19% South and Transport Central 31% America 6% North Power America Environment 18% 20% By Sector By destination H1-04 Sales of €7.3 Billion
Slide 47: Business mix evolution - Pro-forma
Business mix evolution - Pro-forma H1-04 margins** SALES SALES Margin ∼€15Bn in 2004 in 2006 target FY06 4% Corp.* 6% 0.5% 11% Marine 2.8% 31% Transport z Sales : 9 Grow Transport and Service Power 6.3% 18% z Margin : Environment 9 Turnaround in Transport Power 14.4% 19% 9 Stop loss in Turbo- Servic
Slide 48: Power Turbo-Systems
Power Turbo-Systems z Adapt capacity – Major restructuring underway – Halve turnkey businesses and reduce the number of execution centers z Stop the losses – Close out of GT24/GT26 legacy – Reduced exposure to turnkey plants – Improvement in project execution and reduction of costs everywhere 48
Slide 49: Power Service
Power Service z Maintain growth trend – Growing market – Development of GT24/GT26 business – Target on own equipment installed fleet and selective push on other fleets z Maintain margin – Cost reduction • Quality • Sourcing • Overhead reduction – Innovative solutions • Leverage our technology 49
Slide 50: Power Environment
Power Environment z Selectively grow our business – Growth in Environmental Control, biomass and mini-hydro projects – General growth in Asia (China) z Maintain margins – Cost reduction • Restructuring to adjust capacity • Quality • Sourcing – Improved business mix (less exposure to large project ri
Slide 51: Transport
Transport z Grow the activity – Strong order backlog (36 months of sales) ‘mechanically’ increasing sales – Number of opportunities to be pursued (new good orders) z Turnaround the margin – 7% margin target supported by quality of backlog provided we achieve: • Proper contract execution • Restructur
Slide 52: Marine
Marine z Rebuild backlog in selected niches – Cruise-ships – Other sophisticated vessels z Maintain profitability – Adapt capacity to expected workload 52
Slide 53: Debt reduction goal
Debt reduction goal 2003-05 2003-05 Free Cash Flow Disposals Proceeds (1.2) 4.9B€ 2.6 Future 1.3 Receivables 2003 ORA** 2003 Existing Receivables 0.3 Capital 0.9 Increase** 0.3 2.3B€ 3.3 Net Financial Debt Debt March 03 Debt March 05* Objective: Economic debt below €2.5Bn in March 05 * Without takin
Slide 54: Conclusion - Guidance FY-04
Conclusion - Guidance FY-04 z FY-04: another difficult year for ALSTOM – Tough market conditions – Uncertainties impacting commercial activities over H1 z Scope: T&D included only for 3 quarters in FY-04 z Orders: speed of commercial recovery still difficult to predict – FY orders projected at €14-1
Slide 55: Conclusion - Medium-term objectives
Conclusion - Medium-term objectives z Although full year 2004 is a difficult year, all components for recovery should be in place by year end – Refocused portfolio – Cost reduction and performance improvement programmes underway – GT24/GT26: resolution on schedule – Customers confidence expected to
Slide 56: Safe Harbour Statement
Safe Harbour Statement US Private Securities Litigation Reform Act 1995 This presentation contains, and other written or oral reports and communications of ALSTOM may from time to time contain, forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21
Slide 57: www.alstom.com
www.alstom.com