* Orders and profit fall, scraps dividend, burns cash
* CEO says uncertainty over GE deal could hurt business
* CEO says won't stay in transport-focused Alstom
* Margins up in transport, thermal but down in grid, wind
(Recasts with Alstom CEO comments, adds shares)
By Natalie Huet and Benjamin Mallet
PARIS, May 7 French industrial engineer Alstom
posted a drop in orders and annual profit and scrapped
its dividend on Wednesday, underscoring its case for a deal with
U.S. conglomerate General Electric to secure its future.
Alstom, which makes power generation and transmission
systems as well as trains and trams, said last week it was
reviewing a binding $16.9 billion offer from General Electric
(GE) for its energy arm.
It also left the door open to a potential deal with
Germany's Siemens, an alternative European option
promoted by the French government.
The government has repeatedly tried to weigh into the talks
with GE, in an effort to protect jobs and plants in what would
be France's biggest ever takeover by a U.S. company.
Alstom chief executive Patrick Kron said it was legitimate
for the government to comment on the talks, but stressed the
need for a quick fix for the group's problems. He said if
Siemens made a formal offer it would be examined, but that the
uncertainty risked hurting Alstom's business and staff morale.
"My goal is to ensure the process is serene, rigorous and
transparent, but also that it doesn't drag on for too long
because in the end it would take a toll on the company and its
employees," he told reporters.
Siemens, which unveiled a long-awaited restructuring on
Wednesday, confirmed it was considering an offer for Alstom's
energy arm, but added it would not be pressured into a deal.
Alstom was bailed out by the French state 10 years ago and
now needs help again as it battles with big debts, tough
competition and weak demand in the energy market.
It saw orders fall 10 percent, net profit drop 28 percent
and it also burned cash in its financial year ended March 31.
The government, which has a stake of less than 1 percent in
Alstom but whose opposition could be a deterrent to GE, has said
its aim is to secure a better deal. After voicing its preference
for a tie-up with Siemens, it suggested a deal combining GE and
Alstom's rail businesses.
Kron said he was more interested in GE's rail signaling
activities than its diesel-powered locomotives, which are mainly
used for freight. He called these a "niche" activity, mainly
U.S.-centered and unlikely to bring synergies with Alstom's
business, which focuses on passenger transit.
If Alstom's board decided at the end of the month to accept
GE's bid, Kron said the deal would be submitted to the vote of
shareholders in September or October, after consultation with
staff representatives and competition regulators.
Alstom shares were up 0.9 percent at 1205 GMT. Analysts said
the positive news came from stronger-than-expected free cash
flow in the second half of the year. They also welcomed a late
pick up in sales of gas turbines to 11 units over the full year,
when Alstom had sold just one over the first nine months.
SHELTERING FROM THE STORM
A deal to sell Alstom's power businesses, which account for
about 70 percent of its total revenue, would break up the group
and leave it as a pure transport player. That side of the
business has in recent years held up better than the power side,
hit hard by a slump in orders for power equipment from utilities
since the 2008 economic downturn depressed electricity prices.
Kron hinted he would eventually step down from a refocused
Alstom and a company spokesman confirmed it would be driven by
current transport chief Henri Poupart-Lafarge.
Kron said he was for now focused on leading the group's
strategic transition and wanted above all to avoid a repeat of
the bruising restructuring he carried out when he took the helm
in 2003, when Alstom was on the verge of bankruptcy and
ultimately rescued by the French state.
"There is the option of waiting for the storm to come and
see if we'll stay afloat," Kron said. "And there's the option
I've tried to promote, which is finding ways to bring the boat
to port, to protect it from sinking when the storm comes."
Alstom's transport business saw its operating margin improve
to 5.6 percent from 5.4 percent the previous fiscal year, helped
by rising volumes and cost cutting. Profitability at its thermal
power business also edged up to 10.6 percent but fell in
renewables to 4.5 percent and in its grid unit to 5.6 percent.
It posted a cash outflow of 171 million euros ($238
million)for the full year, pushing net debt up 28 percent to
3.02 billion euros.
Sales were stable at 20.3 billion euros, while income from
operations fell 3 percent to 1.42 billion euros. Analysts polled
by Reuters had on average expected sales of 20 billion euros and
income from operations of 1.2 billion.
Net income fell 28 percent to 556 million euros, hit by
higher restructuring costs, debt servicing costs and taxes.
($1 = 0.7177 Euros)
(Editing by James Regan, Chris Gallagher and Mark Potter)