Alstom misses margin guidance as rolling stock ramp-up stumbles, prompting a strategic review and a renewed focus on operational discipline.
ALO.PA · Earnings Call · 2026-04-17
A Humbling Start for a New Mandate
When Martin Sion took the helm at Alstom two weeks before the preliminary results call, he walked into a miss. The company landed an adjusted EBIT margin of ~6% for fiscal 2025-26, below the 7% guidance, and free cash flow of ~€330 million — at the low end of the guided range. The new CEO was blunt about the disappointment.
Our ability to stick to planning is not strong enough. In a project business, sticking to planning is essential.
The issue is not demand: order intake hit a record €27.6 billion (book-to-bill 1.4), and the backlog stands at a massive €100 billion. The problem is execution, particularly in Rolling Stock, where production ramp-ups of new platforms have been slower than expected and homologation has slipped. This is a classic project execution failure, and Sion, who previously led ArianeGroup, knows it well. He made it his priority to drive “deep operational changes,” including tighter planning discipline and better coordination across engineering, supply chain, and production.
The Cash Conundrum
The cash flow statement tells a story of persistent seasonality and mounting pressure. For fiscal 2025-26, free cash flow came in at ~€330 million, aided by strong down payments from commercial activity, but management is not reconfirming next year’s cash plan. The preliminary outlook for 2026-27 guides to positive free cash flow, but with a severe H1 outflow of around €1.5 billion, offset by a very strong H2. CFO Bernard Delpit explained that “Despite execution challenge, adverse currency effects and effects of geopolitics on payments related to Middle East contracts, we've achieved free cash flow in the guided range.” — Bernard-Pierre Delpit, Executive Vice President and Chief Financial Officer · 2026-04-17 However, the company is now bracing for a wider swing than ever. The cash flow guidance is notable for what it omits: no specific number for the full year, just “positive.” This uncertainty is a departure from prior years, when the company confidently reaffirmed ranges. Analysts pressed on the growing gap between earnings and cash, and Delpit’s response was revealing: “To make it very simple, execution makes a difference.” — Bernard-Pierre Delpit, Executive Vice President and Chief Financial Officer · 2026-04-17 It’s a simple truth, but for Alstom it has proven elusive.
No Haircut, but a Hard Look in the Mirror
One area of relief is that the company has ruled out a haircut on contract asset — Bernard confirmed, “No, indeed, no haircut on contract assets.” This is consistent with prior calls, where the company defended its contract asset quality. Yet the underlying issue is that many projects are in the critical ramp-up phase, where development, industrialization, and manufacturing are not aligned. Sion noted that “the end of development, homologation and ramping up production is a challenge in some sites.” The CEO is also reviewing the industrial footprint and the ongoing industrial transformation plan, hinting at potential restructuring. This echoes earlier quarters where the company discussed portfolio optimization, but now it carries more urgency.
The stumble is a stark contrast to the confidence expressed in prior calls. In November 2025, Delpit said, “I hope that by the end of Q3, I will be in a position to refine this assumption.” — Bernard-Pierre Delpit, EVP and CFO · 2025-11-13 That refinement has now turned into a guidance miss. Similarly, in July 2025, he discussed the ramp-up projects: “the ramp-up projects... will account between 15% and 20% of the total volume for this year.” — Bernard-Pierre Delpit, Executive Vice President · 2025-07-23 Those projects have been the Achilles’ heel. With a new CEO and a promise to outline a concrete action plan later this fiscal year, Alstom is at a critical juncture. The backlog is there; the discipline is not, yet. The market will be watching closely to see if Sion can bring the same force that fixed Ariane 6 to this sprawling rail giant.