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France’s Alstom Maintains Full-Year Target, Hopes to Export Trains via Russia

Alstom Chairman and Chief Executive Kron attends an inaugural visit of the Alstom offshore wind turbine plants in Montoir-de-Bretagne

 

France’s Alstom, which is selling most of its power equipment business to General Electric, confirmed its full-year revenue and profit target after posting a 10 percent quarterly sales jump at its rail business.

Alstom said it had struck additional commercial agreements with GE worth 400 million euros ($463.16 million), in a statement on Wednesday. The extra proceeds, flagged late last year, should help the group mitigate the impact of a record $772 million U.S. fine it faces in settlement of bribery allegations, the report said.

The U.S. Department of Justice has required that Alstom, not GE, pay the fine, but Alstom CEO Patrick Kron has said the overall negative impact would not be significant, at around 1-2 percent of the GE deal, thanks to positive adjustments, including fees, GE will pay to use the Alstom brand, according to Reuters.

Alstom shares were 3.7 percent higher at 1138 GMT, the top performers on France’s CAC 40 blue-chip index. Analysts said orders were better than expected and sales growth was sound. The extra proceeds from GE were another positive factor, the report said.

Shareholders last month approved Alstom’s sale of its energy equipment business to GE for 12.35 billion euros after a slump in demand for its power turbines hit the French group’s cash flow and credit ratings. Alstom plans to use the proceeds to expand its rail business, create energy joint ventures with GE, cut debt and buy back up to 4 billion euros in shares, Reuters said.

The deal is expected to close by mid-year. Kron said the group was seeking regulators’ green light on the deal. European Union antitrust regulators have already set a Feb. 23 deadline for a decision, the report said.

Orders at Alstom’s rail arm reached 1.615 billion euros in the third quarter of its fiscal year, above analysts’ average forecasts of 1.5 billion. Third-quarter sales, at 1.5 billion euros, were boosted by deliveries of regional and mainline trains in France, Germany and Italy as well as tramways in Dubai and high-speed trains in Switzerland and Poland, Alstom said, according to Reuters.

Meanwhile, Patrick Kron, Alstom’s boss, sees a silver lining in the worsening state of the Russian economy. The collapse in the value of the Russian ruble could make the country a useful export base for Alstom which badly needs to expand in new markets, now that it is reliant primarily on its trains business, the Wall Street Journal said.

In the short term, the ruble’s slump means Alstom’s still profitable Russian activities are contributing little to the group’s bottom line. On the other hand, the weak ruble will allow Russian rolling-stock manufacturer Transmashholding, Alstom’s local partner in which it also owns a 25% stake, to be more competitive abroad. Kron singled out Kazakhstan where the Alstom-Transmashholding consortium is active, the report said.

Alstom also expects 400 million euros in extra payments from GE which should help offset the $772 million it agreed to pay last month to resolve criminal charges in the U.S. relating to a bribery scheme to win energy contracts around the globe, the Journal said.

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