(News Bulletin 247) – The Parisian index is relatively stable this Thursday, weighed down by the plunge of the railway equipment manufacturer which issued a heavy warning on results.

When it is not the rates that are rising, it is one of the residents of the CAC 40 who is pulling the index down. The Paris Stock Exchange barometer is struggling to rebound this Thursday, dropping 0.01% to 6995.84 points at mid-session.

A major source of market concern, bond yields are not really rising this Thursday. The yield on the US Treasury bond stood at 4.717% compared to 4.736% on Wednesday evening, while that on the 10-year German Bund stood at 2.934% compared to 2.923% on Wednesday evening.

The market continues to digest the data from the ADP firm’s report on American employment, a prelude to the official report published on Friday, which turned out to be lower than expected, thus slowing the rise in rates. Because this report offers some hope to the market on a potential end to key rate increases by the American Federal Reserve (Fed), with perhaps one more increase by the end of the year.

“The bond rout has intensified at an alarming rate, which, given recent moves, is an impressive thing,” notes Deutsche Bank.

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Alstom goes completely off track on the stock market

Still, the big news is on the value side, with Alstom’s plunge of more than 35%, a drop rarely seen on the Parisian index.

The equipment manufacturer has issued a mega-warning on its cash flow, and plans to burn between 500 million and 750 million euros of cash in the current financial year which will end next March, while it had previously anticipated that cash generation would be “significantly positive” over the financial year. The fault lies in a first half during which the group disbursed more than 1 billion euros in cash, according to preliminary data.

These unexpected announcements are enough to bring back to the table investors’ doubts about the robustness of Alstom’s balance sheet, even though the financial director, Bernard Delpit, has ruled out a capital increase.

“In the past, we agreed that concerns about balance sheet fragility were exaggerated, but this assessment depended on the ability to increase FCF (free cash flow, Editor’s note). We are now back to square one,” asserts Stifel.

“The balance sheet now seems too stretched. Net debt is expected to increase to 3.4 billion euros at the end of September and decrease only modestly to 3 billion euros at the end of March. Including pensions, leases and quasi-debt liabilities, Alstom’s adjusted net debt is expected to be close to 5 billion euros over the 2023-2024 financial year, which is equivalent to a net debt/Ebitda ratio (result gross operating income) of 4.6”, develops Deutsche Bank.

“We also expect rating agencies to react negatively to the unexpected change in the group’s FCF trajectory. In May, Moody’s indicated that it expected Alstom’s gross debt-to-Ebitda ratio to fall below 3.75 over the next 18 months. This figure compares to our estimate of 5 at the end of March 2024,” continues the German bank.

Maisons du Monde in the tough

On other stocks, Air France-KLM gained 5.2%, the market reacting one session late to the group’s acquisition of a stake in SAS, the Swedish company, which augurs a consolidation of the market. As well as an increase in recommendation from Bernstein.

Maison du Monde plunged 6% while TP ICAP Midcap went “sell” on the issue.

On the smaller capitalization side, Hexaom gained 12% after showing its confidence for 2023, despite a difficult market environment for house construction.

On other markets, the euro gained 0.1% against the dollar to 1.0513 dollars. Oil prices continue to fall. The December contract on North Sea Brent lost 1.9% to $84.16 per barrel, while that of November on WTI listed in New York lost 2.1% to $82.42 per barrel.