Hello, and welcome to Alstom's nine-month results for fiscal year 2024-2025 presentation. My name is George. I'll be your coordinator of today's event. Please note this conference is being recorded, and for the duration of the call, your lines will be in listen-only mode. However, you have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star one on your telephone keypad to ask a question. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I'd like to hand you over to your host this evening, Mr. Bernard Delpit, Executive Vice President and Chief Financial Officer. Please go ahead, sir.
Good evening, everyone, and welcome to Alstom's webcast dedicated to the third quarter of the fiscal year 2024-2025, presenting orders and sales. Before jumping to the slides, let me please emphasize some context points. Market perspectives remain solid, commercial activity is high, and we see a stable pipeline for the next quarters, i.e., no change to last talks we had in November with H1 release. A number of large projects have been awarded lately, and options on large frame contracts have been exercised. Worth also noting that competition has been intensifying lately in certain regions like the Middle East, Asia, or Latin America. That being said, let's focus on Alstom orders and sales, and I'll start with orders on page three. Order intakes total EUR 4.3 billion in Q3, with large orders at EUR 2.2 billion and a sound level of base orders around EUR 2 billion.
So after nine months, Europe is still leading the pack and represents the large majority of total order intake. 58% of total orders come from services and signaling year to date. Group book-to-bill stands at 1.1, while services book-to-bill is at 2, signaling at 1.3, and rolling stock is 0.8. Backlog remains stable, around €95 billion, even after a 0.9 book-to-bill in Q3, as FX was slightly positive in Q3. The margin on orders continues to be largely exceeding the margin traded in the P&L, and it is fully consistent with our midterm objective. And as a result, our margin in backlog is improving, supporting our trajectory of profitable growth.
On page four, a few contracts to highlight reflecting the commercial successes of the third quarter: about EUR 1.5 billion of large services orders, two major orders for regional trains maintenance in Europe for nine and 23 years, respectively, and also two important wins in the U.S., in California and Denver Airport, and on rolling stock, EUR 500 million of options on RER NG in Paris. Of note, two promising frame agreements in signaling have been signed in Europe for a total of EUR 800 million, with orders to be booked progressively over next quarters, which will support signaling growth trajectory. Turning to sales, organic growth was 9.8% in Q3 and 6.9% year to date. Strong performance of services, delivering double-digit organic growth over the nine months. Sequential growth in rolling stock production from Q2 to Q3, and organic growth accelerating in Q3 with high system deliveries, notably in Mexico.
Signaling reported growth impacted by the sale of our U.S. conventional signalling to Knorr-Bremse in August, and Forex impact has reversed during Q3 and only weighs negative 0.3% on sales after nine months. Regarding rolling stock production, Q3 saw an increase in the output with 1,098 cars. It's up 6% versus Q2, and it's up 10% versus H1 monthly average. It's fair to say that is below our target for two reasons. The first one was already discussed after Q2: situation of the supply chain. Out of 63 critical suppliers, we still had a few impacting our European production lines. It is gradually improving. Another one that is not new but worth mentioning is that we have a high proportion of projects in their starting phase, which are less, let's say, stable than serial production. So not a supply chain issue, but rather some phasing in the ramp-up.
We now see total rolling stock output between 4,300 and 4,400 at the end of the year, below the previous forecast of 4,600 to 4,400, but still higher than last year when you exclude Derby, that is not producing cars anymore. It has an impact on sales and margin of rolling stock. It has been mediated thanks to the rolling stock mix that is improving, thanks to other product line growth that is above the forecast, and thanks to the adaptation of the rolling stock production cost and the acceleration of other cost-savings programs. Turning to the outlook, I can confirm that after nine months, the main assumptions of our full-year target are the same. Market demand is supportive, and the level of down payments should be consistent this year as compared to last fiscal year.
We are now expecting an output of 4,300-4,400 cars for the full year, as just explained. On this basis, the outlook for the full year is confirmed: book-to-bill above one, sales organic growth around 5%, adjusted EBIT around 6.5%, and free cash flow generation to be within a range of EUR 300 million-EUR 500 million for the full year. Before we open for Q&A, let me share a few words of conclusion. Demand remains robust. Management focus is on project execution, with the expected increase in production output in Q4. Integration efforts are ending as per plan, with last countries adopting Alstom tools in Q4. Thank you for listening. I will now take your questions.
Thank you very much, Mr. Delpit. Ladies and gentlemen, as a reminder, if you have any questions, please press star one on your touch-tone keypad. Our very first question is coming from Daniela Costa of Goldman Sachs. Please go ahead.
Hi, good afternoon. Thank you for taking my questions. Just two things. One, sort of to follow up on the points that you mentioned on car production. You keep the revenue guidance despite lowering the cars. Can you clarify, sort of, is there a mix change in terms of the views? These are sort of like higher quality cars. And can you talk through your level of confidence that the supply chain issues are resolved by the end of the year? So just related to car production. And the second point is whether you could comment on what big tenders are out there in the industry at the moment that we should be tracking?
Okay. Thank you for the questions. So first, I would like to remind you that rolling stock is only 50% of sales and production costs. All rolling stock sales are not related to car deliveries. Third, systems and services are growing faster than expected. Fourth, as a consequence, total sales are not deviating and are, in fact, above the initial roadmap, growing at the end of December, 6.9% versus a 5% guidance. The financial planning is updated since the summer, so we are flexing costs, and production costs are now lower than our initial assumptions. So negative impacts are mitigated by the actions on cost year to date, and we will continue to do so. So in a nutshell, the reduction in the number of cars has a limited impact on our financials. The supply chain issues are gradually being solved.
It takes, I would say, a normal time to do so. Double sourcing is starting, and it will mitigate some of the issues we had in the past. It's progressing, so we are confident we can deliver to our plan. On the big tenders, that's your second question. We already published a news on the Toronto overhauls, which is a good contract. We're expecting now also decisions for projects that have already been awarded but not yet booked, such as Portugal. We are also working with MTA in New York, and we have been considered as preferred bidders in Morocco for the very high-speed trains, still expecting signature of the contract. We have also call-offs for some rolling stock frame agreements in Europe and in the U.S., and service contracts extension expected in the U.K., in the U.S., and in Europe.
And as a reminder, we always have a higher level of base orders in Q4. So as a conclusion, I see full-year order intake above EUR 20 billion.
Thank you.
Thank you, Ms. Costa. Our next question will come from Andre Kukhnin, UBS. Please go ahead.
Hi, good evening, everyone. Thank you for taking my questions. I'll just go one at a time. Firstly, just referring to your opening remarks on the increased level of competitiveness in certain regions, and the comment that I think is slightly different to the past when you said your order intake margin is largely above the current. Can you just elaborate a little bit more on that? And has that kind of order intake margin profile become a little more uncertain? Is that the right read of it, or is it just a minor difference that you outlined for completeness?
I'm not sure I get the real sense of your question, Andre. Could you please rephrase it?
Yeah, well, maybe I'll split it. The first one, just on that increased competitiveness in the Middle East and a couple of other regions, could you just elaborate? Is that something that's affecting you directly? Is that something you may end up walking away from as a result?
Okay. No, I just wanted to flag that what I discussed with some investors after Q2, I mean, competition mostly with China when Chinese competitor was intense in some countries. It's a case, as I said, in the Middle East, where I'm sure you've seen the Dubai Blue Line awarded to one of our competitors. I also mention it because something happened in São Paulo, where a reverse auction awarded a contract to a Chinese competitor. And I would say in some other geographies in Asia, same thing. So I don't think it doesn't change anything, but when having a look at the landscape in terms of pipeline and competition, I think it's worth mentioning that we've seen some competition being more aggressive.
But we do not see, by the way, any impact on the margins of our order intake, as most of the regions where we have been awarded new contracts, Europe, are out of the scope of what I called more intense competition.
That's very clear. Thank you. And then just the second part of that question is the language that you said on your order intake and order backlog margin versus the current sales margin. I think you said largely above. I think before, I was just trying to check my notes. I think it was more of a clear above. Is this a change in turn, or is this just us being pedantic?
I don't know exactly what you mean by it, but there is no change in the wording, the language, and anything like that. In fact, the margin year to date is in the same vicinity as at the end of H1 for order intake. We keep the same pace, same trajectory, and it keeps improving the margin on the backlog. As a matter of fact, it's well above the margin that we trade in the P&L. The margin in the backlog is improving gradually. That's why the 50 basis points improvement year over year is confirmed. There is absolutely no change. Sorry if you detected some different wording because it's not the case at all.
That's also very clear. Thank you. I thought it was worth double-checking. And if I may, just last one. On this dynamic of delivering revenue in line with guidance, but with lower production by quarter and for the full year, as you guide it now, you're very clear that you don't expect any implications from that mixed change to margin. But in terms of free cash flow, is there anything that we should read into that in terms of maybe better customer acceptance or low inventories that could maybe point to better working capital development, that you're basically getting higher revenue content with less units?
Yeah. Well, there are different impacts, and I don't want to elaborate too much on that. But in a nutshell, if sales on rolling stock are lower but sales on the other segment of our business are higher, I mean, it gives room to mitigate any other impacts. So on the P&L, I think it's clear. And so that's why we do not change the guidance. Around 6.5% is, I think, is a right way to look at that, including the new assumptions in rolling stock. And on free cash flow, I mean, we have reiterated that in terms of down payments, we see a level that is fully consistent with last year. So of course, when you deliver less cars, you could have an impact on the cash in. But on the other hand, you also flex your costs, so less cash out.
And we expect to burn inventories in Q4 as well. So let's see that at the end of the fiscal year. But again, the message is that we do not change the guidance. I don't think it's material. And we are, let's say, mitigating, offsetting all those impacts here and there. And above all, we have a plan in order to increase our rolling stock because, I mean, here we are looking at things from a, I would say, helicopter view on our production. But in fact, when you go into the details, as I tried to do by deducting Derby, that is now not producing anymore, in fact, our total production of cars is increasing year on year. So I mean, it's a clear ramp-up. Maybe not as expected, but it's a clear ramp-up. So no impact.
Got it. Thank you very much.
You're welcome.
Thank you, Mr. Kukhnin. We'll now move to Akash Gupta of J.P. Morgan. Please go ahead. Your line is open.
Yes. Hi. Thank you. A couple of questions, please. The first one is on organic growth. If I look at nine months organic growth, you had 6.8%. And then when I look at your revised car production outlook at the midpoint in Q4, your car production will see around 13% year-on-year growth. So the question I have is that, is it fair to assume that there could be some upside to your organic guidance of around 5% that you have left unchanged, or is there anything I'm missing in Q4?
I don't think that you are missing anything. So it's your view, and I can say that I share some of what you said. I mean, organic growth was strong in systems. We are confident on signaling as well. And organic is a very strong, I mean, services has a very strong organic growth. So you can put it in different ways, but we are confident that we can deliver the 5% organic growth, maybe with a different mix from what we thought at the beginning of the year, but I think it goes in the right direction.
Thank you. My second question is on cash flow. You mentioned in the statement that guidance of EUR 300 million-EUR 500 million free cash flow assumed this year, down payments to be consistent with last year. If I look at your nine months order intake, then rolling stock and solutions, and these two, I believe, drive down payments. I mean, these two are down 10% year-on-year while you have had strong growth in service and signaling. I mean, the question I have is that with nine months already gone and the visibility that you have for the remaining period, is it reasonable to anticipate that this year down payments will be consistent with last year? Thank you.
Absolutely. That would mean that we expect some contracts to be signed in Q4, a strong Q4 in order intake. So fair to say that some uncertainty here, but we are confident. That's why we reiterate the guidance.
Thank you, Bernard.
Thank you, Mr. Gupta. We'll now go to Gaël de Bray of Deutsche Bank. Please go ahead.
Thank you very much. Good evening, everybody. Actually, I have three questions, so potentially one at a time. Firstly, in terms of the commercial dynamics that apparently remain quite solid in terms of what you've been saying so far, but when you discuss with customers, when you discuss with public rail authorities, I mean, are there any early signs that rail CapEx spending could be about to slow down a bit going into next year or the rest of 2025? I mean, any signs that government's commitment to rail is somewhat challenged by other priorities, such as defense, for example?
I do not have any signs of such a swing from, let's say, infrastructure to defense. I've not discussed with rail authorities, but from what I get from the clients, I mean, by the way, they are not the ones making the choice between defense and infrastructure, but I've not noticed any change. By the way, our tender activity is still very high, so it means that we have a lot of opportunities in the pipeline. We have seen some big contracts under discussion for years and years materializing. We've seen also some call-offs, some options being exercised, as I said at the beginning of my presentation. Frankly, it's not what I noticed. By the way, most of our clients have access to capital markets. We are not dealing directly with states depending on fiscal discussion. I've not noticed such a thing, Gaël.
Great. No, that sounds great. Thank you. The second question is, I think you flagged yourself the award of the turnkey Dubai Metro Blue Line to CRRC. Does it mean the Chinese are now on an equal footing with you in terms of systems and integration capabilities?
I don't know exactly what were the metrics that the client has used to make his decision, but it's fair to say that CRRC has already participated to large turnkey projects, such as the Mecca Metro or Mexico. So there is no news here. In those geographies, they are already very active. But I don't know exactly what made the difference between them and us, but for sure, it was unsatisfactory from our point of view. We thought that we had a very good offer. Does that mean that you could have a broader approach of all turnkey projects? I don't know. But it's true that those kinds of system activities are notably in regions where CRRC is already present. So I wouldn't say it's a change in the dynamics of what we have already seen in the market.
Okay. Thanks very much. And lastly, on the Aventra program, I know you're not producing anymore for the program, but any update on the ongoing negotiations for the finalization of this program and also including the discussions you're having, I guess, on the potential service contracts?
Of course, Gaël, this is not something that I am in a position to discuss here. I mean, negotiations are ongoing. As you said, now the Derby manufacturing phase is ended. By the way, the number of FTE that we have there, blue collars, I mean, for production is down. It goes according to the plan. Still, some trains are already manufactured, but to be delivered to clients. A lot of discussions with clients, but I cannot tell you more.
Okay. I understood. Thanks very much.
Thank you, sir. Ladies and gentlemen, if you have any questions, once again, please press star one. We'll now move to William Mackie, Kepler Cheuvreux. Please go ahead.
Yeah. Good evening, everybody. Thanks for the time. Two questions then, not a lot left. First one would be, could you comment on how you see the competition manifesting itself when you talk about increased competition? Are we talking specifically on prices or on terms and conditions? That's the first. The second question, maybe there's three. The second one is you've changed at the midpoint the rolling stock units production, about 150 units. Can you be a bit more specific? Is that Northern European projects due to supply chains in Northern Europe, or is it across the whole world, or is it in particular areas that you've been driven to change that outlook, and maybe the last is there's an ongoing debate about the Trump administration's view on rail and the support of passenger and freight rail and service and maintenance and high speed.
What is your view on how the Trump administration may affect change across the rail industry in America?
Oh, well, a lot of questions. I will try to make it simple. On competition, I think that we have seen what we have seen was mostly on price. I don't think that on our technological proposal or in terms of payments, maybe on cash. I mean, as I've already explained, there are things that we are not ready to do, okay? And we continue to be disciplined in the way we manage tenders. So when we see some contracts where we believe that it wouldn't make any sense to be awarded a contract with a risk in terms of execution, or even if it's not a risk, but real tough conditions when executing it as sold, we do not go for it. There are some limits that we set for ourselves, and that's why we are not pursuing tenders when we think that we are beyond those limits.
In terms of production and the change in our forecast, it's not statistical. I mean, it's based on side-by-side analysis. So there is not a specific pattern when for a certain site, either because it's a startup project or because we know that certain suppliers might be not delivering exactly the volume that we have asked, this is exactly what drives a change in our production planning. So it's not statistical. It's really specific. And on your last point on the new administration priorities for infrastructure, I guess it's bipartisan. I've not noticed anything, but I will dig into that. I will be more educated when we will discuss next time about the situation in the Americas and in the U.S. specifically.
Thank you. Good evening. Thanks a lot.
Thank you, Mr. Mackie. Ladies and gentlemen, as a final reminder, if you have any questions or follow-up questions, please press star one. We'll now go to Martin Wilkie of Citi. Please go ahead.
Thank you. Good evening, Martin at Citi. Just a couple of final questions. The first one was on supply chain. It doesn't look to have impacted your service business, but presumably there are some components that come from the same suppliers in rolling stock. I just wondered if you could comment on whether the constraints there as well. And the second one was just on currency. Obviously, we have seen some dollar strength, and I know that you are largely hedged across many of your projects, but are there any concerns there with dollar strength in terms of what it's doing to emerging market currencies and any risks you see as part of that? Thank you.
Okay, so as you said, no impact on our service business. I mean, we have not noticed any kind of bottleneck or impact on our performance in terms of availability or whatsoever, so it's really specific, and I think that's something that I already mentioned after H1. It's not across the board. This is something really specific to some suppliers, some sites, some projects, and that's why we have not seen that in the service, and by the way, neither in the signaling business. On hedging and dollar strengthening, we are hedged everywhere, so nothing specific beyond the translation impact. We only hedge, of course, transactions, but not translation, so nothing specific here and nothing to report that could have an adverse impact on our activities and business. No, nothing.
Great. That's good to hear. Thank you.
Thank you.
Thank you, Mr. Wilkie. We now have a follow-up question from Andre Kukhnin of UBS. Please go ahead. Your line is open, sir.
Thanks very much for taking the follow-ups. I'll be brief. I just wanted to ask about services growth and that double-digit growth that you've been delivering. Does that kind of bode well for 2026, 2027 as well? Because I kind of see we're baking those kinds of growth assumptions in those years, and you're beating on the order intake, and the revenue delivery appears to be kind of consistent as well. So I know it's a bit early, but how should we think about maybe calendar year 2026? Can you sustain that sort of level of growth?
Frankly, André, it's too early to discuss the next years. The only thing I can say is that what we are seeing here in terms of growth is just paving the way for the continuous growth of this business. The proportion of services in our order intake is largely in line with what we want to see in the future. So I think it's just what it's fully consistent with what we explained last year when detailing our midterm plan. If it can be better, that would be good news, but we have not discussed that yet, and we are working, in fact, on the update of our medium-term plan, but it's not a discussion that we can have today.
Okay. We'll follow up in three months' time. And if I may, just another broader question on this changing of production lines to flexible, about sort of one-third of the targeted 60. We've now seen the Indian production line that I think is the first. Could you just talk us through the roadmap on this, that kind of change of the 20 sites? Over what number of years do you plan that, and what has the progress been?
Frankly, between November and January, there is no real update on that. The roadmap is still the same in terms of reducing the total number of assembly lines and having a large proportion of that. That can be flexible. No change, and to be totally honest, it's too short a period to see any material change in what we have done.
Got it. Thank you.
Thank you, everybody. Another one?
Yes, we have one question remaining, I believe. It's Jonathan Mounsey of BNP Paribas Exane. Please go ahead.
Good evening. Thanks for fitting me in. Just a follow-up on the supply chain issues. You described them as specific issues, specific sites. Is it also specific train types and given its specific suppliers? And if so, does that mean that there's a concentrated number of projects maybe that are being impacted? And if that were to be the case, are there just maybe some customers where there's maybe a difficult discussion that has to be had about the delay to their train deliveries, and could there be a financial cost to that? I mean, we're talking now about a few hundred trains that won't be delivered relative, I guess, to what we originally expected at the beginning of the year. That feels like something where there may be a price to pay for late delivery of trains. Could you comment on that, please?
You know, Jonathan, it's a day-to-day life of trains to anticipate, sometimes to renegotiate some impacts of deliveries missing. By the way, we are talking here of production, not deliveries, right? In terms of deliveries, our numbers are also growing because when you exclude Derby, I mean, things are also improving. So what I mentioned was really specific to certain trains, certain projects. We are not a product company, okay? So everything we do is dedicated to certain projects. That's why we are not talking of a commodity that could affect all our projects. No, it's really specific. So in case it has an impact on some contractual terms with clients, of course, we discuss it. If it has an impact on the margin of completion, we update it.
That's what we're going to do now on the project reviews for the closing of the year, and we will update you in May on all those impacts. But as I said, it's taken into account in the guidance.
Obviously, we think a lot of the years to come. When we started 2025, you laid out the 4,800-5,000 cars per year. I know it's a bit early for guidance, but with these trains not being manufactured this year, is it reasonable to expect that there'll be some catch-up in 2026? Maybe we can go beyond the 5,000, or is this really just things that permanently sort of move to the right somewhat?
No, no, no. I don't see kind of a recovery or some kind of sudden impact, and then you come back to average. It's more a question of having a long-term trend, and I keep the same order of magnitude. We are sizing the company to deliver between 4,500 and 5,000 cars. The question is how long it takes to deliver, and that's what we are assessing when we are tendering for a contract. It's all about having more flexibility in the way we are dealing with that, but no, I do not see any kind of strong catch-up because we would have missed, I don't know, X train. Next year would be 5,000 plus X or 4,500 plus X. I do not expect that.
So we'll update you on the number of cars for next year, but I still see as a ballpark, sorry, the total capacity installed for the next years between 4,500 and 5,000 cars.
Thank you very much.
Thank you, sir. As we have no further questions, I'll turn the call back over to Mr. Delpit for any additional or closing remarks. Thank you.
Okay, thank you. No other remarks. Talk to you later, and we will see you in May for the full year results. Thank you. Bye-bye.