(Updated with details, analyst comments, stock price and debt default risk)

(Reuters) – Alstom fell sharply on Thursday as the Paris Stock Exchange closed, as the French train maker cut its free cash flow (FCF) forecast for the fiscal year due to the acceleration of production start-up and order delays.

The share price, which began in the morning 45 minutes late, fell 39.07% to 13.07 euros around 2:45 p.m. GMT, the biggest decline recorded by the group since 2003.

It is also the biggest drop in the CAC 40 (+0.02%) and the Stoxx 600 (+0.35%), while the group has wiped out more than three billion euros of market capitalization at this stage.

Alstom announced on Wednesday that it now expects a negative FCF of 500 million to 750 million euros for its 2023-2024 fiscal year, after a negative FCF of 1.15 billion euros for the first half. The group previously forecast “significantly positive” annual FCF.

“A while ago, when interest rates were at zero, having no cash flow was not a big problem for a company. Today it is and the market has no mercy.” , commented Angelo Meda, portfolio manager at Banor SIM.

For Deutsche Bank analysts, the announcement is “a major blow to the credibility of management”. According to them, Alstom should now end the year with a net debt of three billion euros, around a billion more than the previous forecast.

“The group’s ‘investment grade’ rating now appears to be under threat, with a capital increase becoming increasingly likely,” writes Deutsche Bank, which is revising the group’s earnings per share estimates for 2023-2025 down by 8% on average. .

The cost of insuring Alstom’s debt against default risk has reached its highest level since last November, according to data from S&P Global Market Intelligence. Its largest outstanding bond also collapsed, propelling its yield to a record 4.917% on the Tradeweb platform.

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Alstom blamed the acceleration of production, the delay of a rolling stock program in the United Kingdom and the delay of certain orders.

“We remain determined to achieve profitability and free cash flow generation objectives in the medium term,” said CEO Henri Poupart-Lafarge, quoted in a press release.

The group could not be reached for comment Thursday. Citi reiterates that Alstom’s FCF is historically volatile, although there is no liquidity issue, and also highlights that the cash outflows in the first half are the main elements justifying the profit warning.

JP Morgan analysts, who see the drop in Alstom shares as a cheap buying opportunity, write in a note that the group’s problems are “transitory in nature”. The American bank underlines that Alstom has confirmed its margin outlook for the whole year and its medium-term objectives.

CFRA, for its part, lowered its advice on the value from strong buy to buy, with a price target reduced from 18 euros to 12.

(Report by Olivier Sorgho, with Danilo Masoni, Chiara Elisei, Corentin Chappron and Claude Chendjou, edited by Blandine Hénault)

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