Ladies and gentlemen, welcome to the Alstom conference call. For your information, this conference is being recorded. I will now hand over to Henri Poupart-Lafarge. Sir, please go ahead.
Thank you. Good morning, ladies and gentlemen. First of all, happy New Year to all of you. It is still January. Welcome to this conference call on orders and sales for the first nine months of our financial year 2016/2017, with, of course, a specific focus on the third quarter. As you have seen on the press release, Alstom has achieved solid commercial performance over the first nine months of this year, with an order intake at EUR 7.2 billion, up 16% compared to the same period of last year.
In the third quarter, after a very strong first half, we booked EUR 1 billion of orders. The main commercial successes, which were booked during this quarter, included some Signalling and infrastructure contract for Cairo Metro Line 3, some regional trains again for southern Germany, new generation of metros for what we call Greater Lyon in France, and some maintenance for freight locomotives in Mexico. As you have probably noticed in the press, we have recently been awarded several new contracts, which are not booked during the third quarter. They include 15 regional trains for Senegal, which is quite important. This is our first order in Western Africa, which was one of the last region, if I may say, where we were not present. Also, last week, Alstom-Bombardier consortium has been selected to renew the double-deck suburban trains in France, in Paris.
Alstom's share of this contract, I think there are several numbers circling around, Alstom's share is EUR 780 million for the first phase. You have probably also seen this morning that we have announced our first metro system in Vietnam, which confirm Alstom, I would say, expertise and leadership in system. This is for us, a breakthrough in the urban sector in Vietnam, which is one of the last country in the world without any urban system, which will be soon corrected. All these projects are expected to be booked in the fourth quarter. As far as sales are concerned for the first nine months of 2016/2017, sales amounted to EUR 5.2 billion, up 5% organically, which is in line with our global objectives compared to the nine months of last year. This is absolutely perfectly in line.
As you know, our quarterly sales are fueled by all our large contracts. This quarter, it has been fueled by deliveries of suburban and regional trains in Europe. Some progress of Riyadh Metro system, which is now full speed, and of course, PRASA project in South Africa, and still the maintenance project in the U.K., which are extremely long-term projects. For the first nine months, we have a strong book-to-bill at 1.4. At 31st of December 2016, the backlog reached a new record at EUR 33.8 billion, which again confirms the visibility on the future sales and give a good ground to our objectives for 2020.
Some events in this quarter, one which has been quite heavily publicized, which was the fact that in October 2016, the French government and Alstom presented a plan to maintain the railway industrial activities on Belfort, which was one of the event of the quarter. As importantly, in December 2016, we handed over the first PRASA XTrapolis Mega. When we say handed over, it means that not only of course the train is delivered in South Africa, but the train has been accepted by the customer. The manufacturing plant, where the 580 trains will be produced, is currently under construction, and I have visited it again, and it's going absolutely according to schedule. 21st of December 2016, we have signed also the purchase agreement for the acquisition of Nomad Digital. It's a world-leading provider of connectivity solutions to the railway industry.
This is a relatively small acquisition, but which is important in our strategy towards digitalization. Not only it provides us some solution, Wi-Fi and connectivity solutions, but also it provides us with some key technology, which were actually being developed within Alstom. This will speed up the development of this technology, of this bricks of technology necessary to implement digitalization inside the trains. This quarter, which is totally in line with our expectations, allow us of course to reconfirm again today our 2020 objectives as far as growth is concerned, profitability and cash generations are concerned. Thank you very much for your attention. With Marie-José Donsion, our CFO, I'm now ready to answer to all of your questions. Thanks a lot.
Please press star one to enter the queue. We remind you that only one question per person is allowed. We will take our first question from Gael de-Bray of Deutsche Bank. Please go ahead. Your line is open.
Thank you very much. Good morning. Good morning, everybody. My first question is on the top line development. You've delivered 2% organic growth in Q3 and 5% for the first nine months of the year. How do you see Q4 planning out now in terms of milestones recognition on some of the key contracts like, for example, the Riyadh Metros or the PRASA project? How do you see the comparison basis for Q4, given the very strong performance of last year's Q4? The second question is, what do you think of your Chinese competitor now getting an access to the Czech Republic market? Do you think this is the sort of moves that could possibly accelerate the consolidation process amongst European players?
Thank you, Gael, for your questions. On the sales profile, you are right by mentioning the milestones. It's clear that our sales profile depend on a few milestones, therefore, one should not look at EUR 50 million more or EUR 50 million less, because this EUR 50 million is less than one milestone. Having said that, it's clear as well that our Q3 is usually lower than our Q4. In Europe, mostly, you have the Christmas time, which is taking some of the days, which are not helping the overall sales level. We today, I'm not going to give more guidance that we used to do, but we confirm the guidance of 5% on average growth, we have no reason to believe that this average will not be met this year. This is on the sales development.
To be clear, despite the fact that Q4 of last year was particularly strong, I have that part well in mind. On the Chinese competition, as I said, I think a number of times, in my plan, I was expecting the Chinese to enter into Europe one day or another. By the way, I'm not surprised that they enter into Europe from the east. This was expected. In that sense, whether it accelerates any strategic move, I would not say so, because it's not a surprise per se. Whether globally the Chinese expansion in general is a global triggering factor for the consolidation in general, I would say yes, this participates, among other things, such as standardization, such as economies of scale, such as a number of other things.
There are a number of factors which explain why I think that in the long term, this industry will consolidate, this is confirming this view. No surprise, no change, just a confirmation of this trend.
Thank you very much. We will take our next question from James Stettler, Barclays. Please go ahead. Your line is open.
Yes. Good morning, all, thanks for taking my questions. Can you talk again about the order pipeline, what you're seeing out there, what we should be aware of in terms of large projects coming up? Indeed, what you're seeing, again, we hear a lot about the Chinese. Is it having any impact on pricing terms and conditions? Finally, just on PRASA, how should we be looking at the sort of revenue recognition? I think you're now going to see a bit of a gap as the plant gets built out. How are you getting on in building up the supply chain, which is obviously a very important part of the entire project? Thank you.
Thank you. In terms of orders, you have seen the largest order, which was in the pipeline was probably the suburban trains for France, which has been awarded and booked now in January. You have a few tenders around the world which are still floating. I don't expect in the coming weeks any such large announcements. The pipeline is still quite active. It's more a question of phasing of these orders. I don't expect a huge announcement in the coming weeks. There is nothing that I'm expecting as a tender in the coming weeks. We have announced today Hanoi, which was a mid-size order, which is not a large order, but a mid-size, very important for our Asian footprint and for the system capabilities. That's what we expect so far. We're still working on projects such as Mecca and so forth, but these are long-term projects.
Thank you. In terms of Chinese, I don't see today any direct impact on the Chinese competition on terms and conditions. As you know, the terms and conditions are part of the tendering documents, they are quite stable, whether we call on commercial terms or on financial terms. I have not seen any impact there. Clearly, in terms of cost, as you know, our strategy is to be able to be competitive against the Chinese, either through quality or through TCO, so total cost of ownership, or also through cost per se, this is why we have launched this platform in India for Asia to be very competitive, even in terms of cost base, even though we count on it as well, but not only in terms of quality or in terms of total cost of ownership. Lastly, of PRASA sales recognition, you are right in your sequence.
It's true that because of the delay of the beginning of the erection of the factory, you may have that in mind because of the delay in the access of the land. We have a gap in the production of the trains between the production of the trains in Brazil and the production of the trains in South Africa. You will have a gap in sales as well in that respect. It's a milestone, you have a number of internal milestones. There will be nothing dramatic and certainly nothing that you will see at the global level of Alstom. It's a minor phasing, nothing that you should take into account really at your level.
In terms of supply chain, again, we are entering into this PRASA project much more than we should and much more than we do for other projects, but I understand that it's of interest for you. We have crossed a very important milestone during this quarter, which is the fact that some of the components, main subsystems, would actually be manufactured in Ubunye, which is the factory which we have precisely bought for that purpose, very close to the new factory that we are erecting. We have bought another factory, which was a historical site of train manufacturing in South Africa, very close to our new factory. This will help a lot in the supply chain progression because part of the equipment would actually be internally made. We are progressing in that respect.
As I said as well, I remind you that our trains in Brazil are already including a number of supplies coming from South Africa. We have made already a lot of progress, this is a challenge, to be clear, the ramp-up of the supply chain is a challenge, we are progressing quite well in that direction. Thank you.
Thanks a lot.
We will take our next question from Alf Glaser of Oddo. Please go ahead. Your line is open.
Yes, good morning. I would like to ask you about the Indian locomotive contract. Could you update us also on progress in India on the site construction and on the project itself? Second, I wanted to ask you, when do you expect to get the orders in France related to the Belfort manufacturing project?
On India, this call will turn into a project review soon. On India, of course, we are much behind PRASA in that respect. We are more talking about the engineering of the locomotives. We have passed a number of milestones in terms of engineering, in terms of design freeze, which was expected at the end of December. This is in line. We are just starting the construction of the site. We have the land. It has been much quicker to get the land in that respect because it was already organized during the tender. We have the land, and now we are starting to erect the factory. I will invite you to come. I think it's quite far away from Delhi. Today there is nothing really to see. It's really a flat land, but we are starting.
We have engaged the engineering company and so forth. This is starting. In line, there is no signs of worry, neither on engineering solutions have been accepted by the customer, nor on the site itself. It's starting. On Belfort, as always, it has been quick to be promised, then it takes time to be implemented. I don't know if you have that in mind, but there are several orders which should come. The first one is regarding 30 regional trains, which actually are not directly for Belfort, but for Reichshoffen. This has been accepted by the board of SMCS in December, this should be awarded soon. Then you have the famous very high speed, which are not yet, I would say, accepted by the board of SNCF or of STIF, it will take a little bit more time.
To your point of to whether this will be included in Q4 of this year or Q1 of next year, to be fair, I don't know at that stage. My guesstimate would be that the regional trains will be probably in Q4 of this year. The rest, I'm more uncertain. As you know, we are booking when everything is there, everything is done, we received all the papers, the payments, and so forth. That's between the two. These things are progressing, you can say slowly, but not surprisingly.
Okay. Thank you very much.
We will take our next question from Christophe Cohen of Societe Generale. Please go ahead. Your line is open.
Yes. Good morning, everybody. Two question if I may ask. First, could you come back on the mix evolution during Q3, just to be aware of what has really happened there? Second question, could you give us what happened with the Spanish contract where you were not awarded? It appears to me that there were some pricing pressure on the price on this contract. Then could you update us about these specific ones? More globally, as you mentioned also, no big pipelines in the coming weeks. Could you just update us about U.K. on the London Metro, if I may ask, please?
Sure. You may be directly impacted by the London Metro. By the way, on the London Metro, just to answer on this one, it's not at all something which will come in the coming weeks. We are coming months, if not more. It's a very complex tender, which will take a lot of time to be analyzed by the London Metro and then finalized. This is clearly something which is on the pipe for a long time. Back to your first question on the mix, on Q3. Now rolling stock is clearly below 50%. We were at 46, we are at 45. This is more or less now established, let's say below the 50% mark.
We had asked for H1, relatively slow maintenance service contract. This is primarily due to the exchange rate in the U.K. We have a large proportion of our service business in the U.K., both on West Coast Main Line and on Northern Line in London. This, of course, is impacted by the evolution of the British pound. This is explaining and also, of course, because you could say, "Why isn't it growing faster?" Typically, maintenance contract, we are booking a lot of maintenance contract, but they will be traded over time. As you know, we need first to deliver the trains. Most of these contracts are bundled contract with new trains, so the ramp-up is extremely slow. The rest is in line with our expectations, nothing particular. Signalling and systems are growing nicely. On the Spain tender, I would say, of course, it's a bad news.
We wanted to win, otherwise we would not have tendered. At the same time, we were happy we were number 2, so maybe it's the worst place to be. In a way, it proves the validity of our concept and of the new trends. Yes, the prices of Talgo, because he's the winner, were quite low. To be fair, there were also some specificities in the tender which were favoring Talgo because they were weighting some of the specificities such as the variable gauge and so forth, which we didn't have. We had to win, we would have had to compensate for this, I would say, extra points that they get from this very Spanish type of technology. Why Spanish? Because this is the only place where you have this kind of variable gauge. It's a disappointment.
I'm happy to see that nevertheless, on the, I would say, the standard platform, our standard platform is very well-placed. We are not disappointed from a platform standpoint.
Okay, thanks a lot. May I add another question about your acquisition, i.e., Nomad. Clearly, this is a small acquisition, but could you give us what is exactly the positioning into the value chain where you should be able to address maybe better your clients, more particularly in terms of the passenger information and so on and so forth? How it goes with potential cross-selling opportunity vis-à-vis your current portfolio for the solution you provide to your main clients or to your clients? Just to understand well what is the break that is breaking through this acquisition of Nomad, please.
There are two things. There are the access to the market and the technology. In terms of access to the market, Nomad is today quite well established around the world. It's a startup in a way, but it's already a startup with a quite wide network. For example, Amtrak is one of their customer. Their customer is either the operator, which is upgrading the trains or which is buying their products as a different lot, or the train manufacturers, which are incorporating, including Nomad product in their own solutions. Basically, where Nomad is to be a little bit simplistic, because it's a number of technology, but where Nomad is extremely good at, is all around telecom in the train, communication in the train.
It's either to provide connectivity such as Wi-Fi or to provide passenger informations or, which has not been known, but it's very important for us, to provide some information on the subsystems and therefore to help in our condition-based monitoring systems. What we want to do with Nomad is, one, to increase their reach, both because of the network of Alstom worldwide, as well as, I would say, because of our partnership with different manufacturers worldwide. We want to increase their global reach, and we want to use their technology, not only for passenger information, but also for our predictive maintenance and also for all our suite in terms of digital maintenance and digital communication that we have with our trains. As you know, we have a number of projects and solutions which are communicating with the trains.
The technology of Nomad is of particular interest for us for this kind of communication.
Okay, thanks a lot. Very clear.
Thank you, operator. If there is no question, we can stop the
As a reminder, to ask a question, please press star one to enter the queue. We remind that only one question per person is allowed. We have a follow-on question from Christophe Coron of Societe Generale. Please go ahead. Your line is open.
Sorry to come back, just one last question, because I don't think you mentioned that. What was the contribution of GE Signalling during the third quarter? Please.
No, I've not mentioned it, and I'm turning to Marie-José. Maybe she has the number.
I have in mind a contribution for the 9 months of EUR 130 million. To be fair, I can't recall the quarter itself.
Let's say one third of that.
Okay. Let's consider it's pretty linear.
Yeah.
Okay. EUR 130 million.
Sales, yeah.
Yeah, absolutely.
Yeah. On sales. It was EUR 120 after one H. You consolidate just one month, if I'm correct.
It's closer to EUR 140 for the nine months. It's probably EUR 20. Okay, we don't want to say Yes, absolutely. one month only. Yes.
The organic calculation has only considered, yes, one month gap between last year and this year since it was acquired early November. I would say the contribution in terms of organic has been taken into account for two months this quarter.
Okay. Thanks a lot.
Thank you.
As we have no further questions, I would like to hand the conference back to Henri Poupart-Lafarge for any additional or closing remarks.
Thank you everybody for your attention. Thank you for your time this morning. I'll be happy to meet you all again on the fourth, on May the fourth, which is the day of Star Wars. Thank you very much. Bye-bye.
Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.