November 6, 2013 / 7:06 AM / in 4 years

UPDATE 3-Alstom to cut jobs, sell assets in dash for cash

* French engineer to cut 1,300 jobs, mainly in Europe

* Eyes 1-2 bln eur of asset sales by December 2014

* To ramp up annual cost savings to 1.5 bln eur by 2016

* CFO says more layoffs could follow

* CEO says no capital hike needed (Adds transport unit valuation, comments from analyst call, news conference)

By Natalie Huet and Benjamin Mallet

PARIS, Nov 6 (Reuters) - France’s Alstom said on Wednesday it would shed at least 1,300 jobs worldwide and sell up to 2 billion euros ($2.7 billion) of assets, as it strives to raise cash after a difficult first half to its business year.

The job cuts, which chief financial Officer Nicolas Tissot said could be followed by more layoffs, put the power and engineering firm on a potential collision course with the French government, which is trying to bring down double-digit unemployment rates.

Alstom hopes to sell a minority stake in its unit known for making high-speed TGV trains, along with non-strategic assets, by December 2014, and to ramp up annual cost savings to 1.5 billion euros by 2016.

The company, which also makes turbines for wind farms and power stations, was bailed out by the French state a decade ago and has strongly relied on orders from national rail operator SNCF and utility EDF.

Wednesday’s job cuts account for close to 1.4 percent of Alstom’s 93,000-strong workforce, just under a fifth of whom are employed in France.

Chief Executive Patrick Kron did not give a breakdown of the cuts but said they would hit Alstom’s German coal-fired boiler business and IT jobs in France.

Asked about the job cuts, French Industry Minister Arnaud Montebourg appeared to contradict Alstom, saying the group’s plan would not have an impact in France.

Shares in Alstom were up 6.5 percent at 1556 GMT after jumping 8 percent to a five-month high, and were the strongest performers on France’s CAC 40 blue-chip index.

While down from a year ago, its results beat market expectations and the company confirmed its full-year targets, saying it expected larger orders and more down payments in the second half to support a return to positive free cash flow.

Like rivals Siemens and ABB, Alstom has faced a dearth of large orders, especially in thermal power, as utilities delay spending in a weak global economy.


“During the first six months of 2013/14, the macro-economic conditions have remained challenging with a sluggish economic environment in mature countries and slower growth in some emerging countries,” Alstom said in a statement.

Kron said Alstom could sell a 20 to 30 percent stake in its transport unit. He said various options were on the table, from a sale to industrial or financial partners to a stock market listing.

He refused to give a price for the business, which some analysts value around 3 billion euros, based on a sector multiple of nine to 10 times operating profit.

Kron said cash from such a sale would help Alstom strengthen its balance sheet and give it room, if needed, for future acquisitions. He said the company had a solid balance sheet and did not need to raise fresh capital, especially not at current valuations he called “unpleasant”.

Alstom shares have lost more than half of their value since the 2008 downturn depressed demand for power demand and prompted utilities to halt investment in new equipment. Shares are trading at around nine times forecast earnings, compared to a forward PE of around 15 for its peers.

Alstom’s free cash flow turned positive in the last fiscal year after two years of outflows, and Kron has made cash generation a priority. But the outflow in the first half to September was 511 million euros, partly due to payment timings, while orders fells 22 percent to 9.4 billion.

Based on hopes for larger orders and more down payments in the second half, the group stuck to its full-year targets for positive free cash flow, low single-digit organic sales growth and a stable operating margin.

The book-to-bill ratio, a measure of new orders against actual shipments, was close to 1, while the order backlog totalled 51 billion euros, representing 30 months of sales.

First-half net profit fell 3 percent to 375 million euros while sales were little changed at 9.73 billion. Analysts polled by Thomson Reuters I/B/E/S had on average expected net profit of 352 million on sales of 9.59 billion.

$1 = 0.7421 euros Additional reporting by Olaf Storbeck in London and Alexandre Boksenbaum-Granier in Paris, Editing by James Regan, Elizabeth Piper and John Stonestreet

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