Alstom lowers its annual targets: adjusted EBIT margin now targeted at 1% instead of 6.5%
The rail manufacturer published preliminary unaudited half-year results on November 2, 2026, marked by a negative operating margin and execution difficulties in Europe, mainly on its Coradia Max platform.
Chief Executive Martin Sion, in the role since April 2026, presents these revisions as the outcome of a project-by-project risk review, with the goal of normalizing performance from the next financial year.
A negative half-year margin despite rising orders
In the first half of fiscal year 2026/27, ended September 30, 2026, Alstom recorded orders of €11.0 billion, compared with €10.5 billion a year earlier, an increase of 5%. Commercial momentum accelerated in the second quarter, with €8.4 billion of orders and an order-to-revenue ratio of 1.8.
For the half-year as a whole, this ratio reached 1.2, a level consistent with the target set for the fiscal year. Revenue rose 3% on a reported basis and 2% on an organic basis, to €9.3 billion from €9.1 billion.
Production, however, declined: 1,860 cars left the factories, compared with 2,017 a year earlier, a drop of 8%. Coradia Max manufacturing was suspended in the first quarter in order to correct the problems identified and limit subsequent rework.
On profitability, the adjusted EBIT margin came to approximately -4%, compared with 6.4% in the first half of the previous fiscal year. According to the group, this decline is largely due to gross margin adjustments on projects carried out for Germany and from that country.
During the half-year, new technical issues and additional testing requirements emerged on the Coradia Max. At the same time, enhanced reviews of several critical rolling stock projects led to revisions of the margins at completion on certain contracts.
Free cash flow came to -€1,248 million, compared with -€740 million a year earlier, a level the group attributes to seasonality. Some milestone payments and advance payments received during the half-year partially limited this cash outflow compared with what had been planned.
Production, growth, margin and cash flow: annual targets revised
These preliminary results led Alstom to revise all of its annual targets, with the exception of the order-to-revenue ratio, which is still expected to remain above 1. The group bases this maintained target on demand and on its portfolio of opportunities.
This outlook comes as two contracts announced in October will be booked in the third quarter: €947 million for the maintenance of Greater Anglia trains, announced on October 16, 2026, and €800 million for metro systems in Hanoi, announced on October 19, 2026.
The targeted production volume has been reduced to approximately 4,000 cars, compared with 4,400 to 4,500 previously, partly due to the delay incurred in the first half. Expected organic growth has moved from about 5% to a range between low and mid single digits, partly penalized by this lower production.
The adjusted EBIT margin target now stands at approximately 1%, compared with 6.5% previously announced. This target assumes a margin recovery to approximately 6.5% in the second half.
Annual free cash flow is now expected to be -€1.5 billion, whereas the group had previously forecast a positive figure. The gap is mainly due to the postponement of milestone payments to subsequent fiscal years, linked to longer approval processes and commercial service launches later than planned, including that of the Coradia Max.
The risk review must be completed by the end of the fiscal year. Alstom anticipates a normalization of its performance from fiscal year 2027/28 and a trajectory tending toward an adjusted EBIT of 8% to 10% in the medium term, for a group that reported, in its annual accounts published on June 2, 2026, revenue of €19.17 billion for the fiscal year ended March 31, 2026.
Net debt rising and review of deleveraging options
Net debt reached €1.1 billion at September 30, 2026, compared with €0.4 billion at March 31, 2026. This increase mainly reflects the consumption of free cash flow, a coupon of €44 million paid on perpetual subordinated securities, and an €81 million increase in lease liabilities.
The issuance of a green hybrid bond in June 2026, which raised €694 million, partially offset this. The group also held €1.65 billion in cash and cash equivalents at the end of September.
In addition, there is an undrawn €2.5 billion revolving credit facility maturing in July 2029, and a backup line of €1.75 billion maturing in January 2029. The latter is backed by a €2.5 billion commercial paper programme, with no outstanding amount at September 30.
On November 1, 2026, Alstom signed with a major international bank a new €2.0 billion revolving credit facility, with no financial covenant and maturing in November 2028.
To preserve an investment-grade credit rating, the board of directors launched a review of all organic and non-organic options, with the aim of reducing debt by approximately €2 billion by September 2027. Shareholders represented on the board support this approach, with the group retaining control over the timing and scale of the measures.
On the operational side, initiatives have been underway since April 2026: lean production, faster incident resolution, greater accountability for project managers, discipline on costs and purchasing, and process simplification. Decisions arising from the review of the organizational model are expected in early 2027.
An investor day, planned for the second quarter of 2027, will detail the strategic plan and medium-term outlook. In the meantime, final half-year results are expected on November 17, 2026, followed by third-quarter orders and sales on January 19, 2027.
