(News Bulletin 247) – Laurent Martinez, director of finance for the group for almost five years, will leave the railway equipment manufacturer in September to join the telecoms group. Which, according to Deutsche Bank, adds uncertainty to the case.
The departures of financial directors can sometimes create a stir on the stock market. This had been the case for OVHcloud recently and even the announcement of the departure of that of Airbus had made some analysts frown at the end of August.
This time it is Alstom which is suffering on the stock market, its title falling by 3.4% around 10:45 a.m., after having opened by losing more than 8% at the start of the session. Its financial director, Laurent Martinez, in place since July 2018, is preparing to leave the railway equipment manufacturer. The Orange telecoms group has indeed announced its recruitment on Thursday, after the market closes.
Laurent Martinez will join the company headed by Christel Heydemann on September 1. By this date, Jean-Michel Thibaud, deputy financial director of Orange, will act as interim manager.
A graduate of the ENSEEIHT in Toulouse, Laurent Martinez had, before Alstom, spent most of his career at EADS, which has since become Airbus, which he joined in 1996, integrating Astrium, the space branch of the company.
The difficult integration of Bombardier Transportation
Laurent Martinez holds a key position at Alstom, especially since the acquisition, finalized in early 2021, of the Canadian Bombardier Transport. The integration of this acquisition, which made it possible to strengthen Alstom against the Chinese juggernaut CRRC by providing it with complementarities in terms of products and geographies, was painful for Alstom, the group inheriting several disputed contracts with execution difficulties. This weighed on its profitability and had in particular forced it to invest massively to restore square to the difficult projects of Quebec society. In the first half of its 2021-2022 financial year, Alstom had thus burned 1.46 billion euros in free cash flow.
Since then Alstom has stabilized the problems arising from Bombardier Transportation. But the group still has to exclude from its order book the Canadian group’s zero gross margin contracts, which represented 2.6 billion euros in the 2021-2022 financial year ended last March (out of a total of 15.5 billion euros in revenue) and will represent a little less over the current financial year.
The market also remains very nervous about the Alstom file. According to a ranking compiled last November by S&P Global Market Intelligence at the request of News Bulletin 247, Alstom was the SBF 120 stock most sold short by investors ahead of… Orpea. Over five years, the action has fallen by more than 30%.
It is in this context that the announcement of the departure of Laurent Martinez therefore occurs. An announcement that caused Deutsche Bank to downgrade its advice on Alstom from “buy” to “hold”.
The German bank believes that “investor confidence in Laurent Martinez may have been affected by the difficulties of the due diligence process [les examens et vérifications faites par un acquéreur dans le cadre d’une acquisition, NDLR] on the acquisition of Bombardier Transportation and by the group’s subsequent cash flow problems”.
Deutsche Bank adds that this departure “brings additional uncertainties regarding, first, the maintenance of current financial objectives and, second, any potential disruption in the company’s communications with Moody’s”.
The rating agency currently assigns the rating of “Baa2” to the railway group, a notch above “Baa3”, the border of the classification between a rating in speculative category and in investment category. However, the company has made the defense of its investment grade rating a priority. This has, in the past, led the market to fear (wrongly it is true) that Alstom is carrying out a capital increase.
“The process of integrating Bombardier Transportation is complex and spans several years. We will wait until Alstom has put in place its full management team to re-examine the case,” concludes Deutsche Bank.
An analyst, however, wants to put the departure of Laurent Martinez into perspective. “The market reaction may not be justified. The suddenness of the announcement is a bit annoying but the departure of a CFO is not an industrial disaster, it is part of the life of corporate governance. ‘a business,’ he says. This financial intermediary even believes “that this may be an opportunity to position oneself on a title which could rebound when its results are published”.
Alstom will publish the results of its 2022-2023 financial year on May 10 and will hold a day dedicated to investors on this occasion.
Contacted by News Bulletin 247, several Alstom spokespersons were not immediately available to comment.
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