Paris: French engineering group Alstom predicted its operating margin would decline over the next two fiscal years amid a still challenging economic climate, as it posted forecast-beating earnings for fiscal year 2009-10.
Alstom, in which France’s building to media group Bouygues owns a 30% stake, said its order backlog remained robust despite a slight decline and vowed to continue focusing on cost control and resist accepting lower prices.
Alstom said on Tuesday its operating margin would be in a range of 7-8% over the next two fiscal years, having achieved 9.1% in the full year ended 31 March.
Chairman and chief executive Patrick Kron told a conference call that the group believed it had hit bottom some 12 months ago but the recovery since than had been slow, due to the group’s profile of a late cycle company that was hit later by the downturn and would benefit later of any upswing.
Alstom is a maker of high-speed trains, urban commuter systems and industrial power plants. Main rivals are GE, ABB, Siemens, Bombardier or Mitsubishi Heavy Industries Ltd.
The share rose by some 3% in early trade to €45.5 , still well below the year high of €55.14 set in January, for a market cap of some €13.2 billion.
“Structurally, our markets are bound to take off again but I remain uncertain about the timing and the rhythm of the recovery,” Kron said, adding the uncertainties were related to overall global economic demand and not to financial events such as the crisis in Greece.
“We have some projects in Greece, but we have projects in many countries. I have my holidays there each year so I will tell you in August after my passage on the beaches what my analysis is of the situation there,” he said.
He said the first half of the current financial year would not be ‘flamboyant´ and saw the full-year sales down.
He declined to give a margin forecast breakdown for the company’s activities but added the power activities would weigh more than transport, as the investments were relatively heavy and multi-year projects based on estimates of economic growth.
“Whether you expect one% growth over ten years or 2% makes quite a difference in forecasted power consumption,” he said.
Alstom proposed to raise the dividend by 11% after net profit rose 10% and operating profit grew 16% to €1.779 bilion ($2.37 billion), helped by cost cuts and improving orders in the second half. Sales increased 5% to €19.650 billion despite a 39% fall in new orders.
Operating margin came at 9.1% of sales against 8.2% a year ago, beating the company’s guidance of around 9% and analyst predictions of 8.4%.
Alstom had been expected to post an operating profit of 1.660 billion euros on sales of €19.708 billion , according to an average of analysts’ forecasts carried out by Thomson Reuters.
US competitor General Electric Co last month posted a forecast-beating profit for the first quarter but saw its shares fall after weak revenue and declining orders disappointed investors.
The world’s biggest maker of jet engines and electricity producing turbines said that it had put the worst of the downturn behind it and that it expected profit to rise through the rest of the year after falling 32% in the first quarter.
Alstom and electric equipment company Schneider Electric in March won European Union regulatory clearance for their buy of nuclear reactor maker Areva’s electricity transmission and distribution unit.