ALSTOM UNSP ((ALSMY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for ALSTOM UNSP painted a picture of robust growth tempered by certain financial challenges. The company reported strong order intake and sales growth, with notable improvements in adjusted EBIT and backlog margin. However, these positive developments were offset by issues such as negative free cash flow and pressures on the gross margin due to regional mix and foreign exchange headwinds.
Strong Order Intake
ALSTOM UNSP demonstrated strong commercial momentum in the second quarter, with orders reaching EUR 10.5 billion. This growth was particularly driven by the Rolling Stock segment and activities in North America, resulting in a book-to-bill ratio of 1.2.
Organic Sales Growth
The company reported sales of EUR 9.1 billion, marking a 7.9% organic growth. This increase was supported by contributions from all product lines and regions, showcasing the company’s broad-based growth strategy.
Adjusted EBIT Growth
ALSTOM UNSP’s adjusted EBIT rose to EUR 580 million, reflecting a 13% year-on-year increase. The EBIT margin improved to 6.4%, up from 5.9% in the same period last year, indicating enhanced operational efficiency.
Notable Contracts Secured
The company secured significant contracts, including a EUR 2 billion Rolling Stock contract with the MTA in New York and a EUR 1 billion Rolling Stock option exercised by NGT in New Jersey, highlighting its strong market presence.
Backlog Margin Improvement
The average gross margin in the backlog improved to 18% at the end of the first half, a 20 basis point increase compared to the end of the last fiscal year, reflecting better pricing and cost management.
Negative Free Cash Flow
As anticipated, ALSTOM UNSP reported a negative free cash flow of EUR 740 million, attributed to typical higher seasonality, which remains a challenge for the company.
Gross Margin Pressure
The gross margin was EUR 1.2 billion, representing 13.6% of sales, a slight decrease from the previous fiscal year, due to pressures from regional mix and foreign exchange impacts.
FX Impact
Foreign exchange posed a 3.3 point headwind, primarily due to the appreciation of the euro against most currencies, which impacted the company’s sales growth.
Forward-Looking Guidance
Looking ahead, ALSTOM UNSP management provided guidance for the fiscal year 2025-2026, maintaining a book-to-bill ratio above 1. The company anticipates organic sales growth to exceed 5%, an increase from the previous forecast of 3% to 5%. The adjusted EBIT margin is expected to reach around 7%, with free cash flow generation projected between EUR 200 million and EUR 400 million.
In summary, ALSTOM UNSP’s earnings call highlighted a strong performance in order intake and sales growth, coupled with improvements in adjusted EBIT and backlog margin. Despite these positive trends, challenges such as negative free cash flow and gross margin pressures remain. The company’s forward-looking guidance suggests continued growth and operational improvements, positioning it well for the future.