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Alstom slumps on drastic sale
PARIS, France (Reuters) -- Shares of Alstom slumped on Wednesday after the heavy engineering firm said one-off charges would push it to a large net loss this year as it ditches a key business and issues new stock to avoid a cash crunch. The shares, which are down 94 percent from their June 2001 peak, tumbled 39 percent to an all-time low of 1.65 euros by 0911 GMT in Paris. Alstom said in a statement it planned to dispose of its transmission and distribution unit and its industrial turbine business in an effort to raise three billion euros by March 2004. The company, which makes trains, cruise liners and heavy industrial equipment for the energy market, also said it would launch a second 600 million-euro capital increase to help shore up its cash when the time was right. Alstom has been plagued by costly technical faults with its gas turbines and the bankruptcy of a major shipping customer. Flagging orders amid an industry downturn have made things worse. In a research note, CIC Securities called the announcement ``very bad news'' and said it was putting its "buy'' recommendation and 5.4 euro target price under review. The company had been expected to announce plans to sell the core money-spinning energy transmission and distribution arm. But the plan to sell of its industrial turbine business comes as a surprise, as do plans to reassess its Marine unit. It expects to post a net loss of 1.3-1.4 billion euros in the fiscal year ending April 2003 after taking a pre-tax charge of 1.35 billion euros linked to problems with its gas turbines and UK trains. The firm said problems linked to its heavy gas turbines had bled one billion euros in cash, meaning free cash flow for the year 2002/3 was likely to be negative to the tune of 400 million to 500 million euros. Alstom said accelerated cost-cutting measures would yield 500 million euros per year within two years, and said it had one billion euros available in credit lines. "We need to adapt to the power market, where demand has significantly weakened over the past year, to address the additional costs of past operational problems, and materially strengthen our financial structure,'' new Chairman and Chief Executive Patrick Kron said in a statement. COSTLY FAULTSAlstom said it would review options to consolidate its marine activities in the medium term through partnerships or alliances. The company expects to post an operating margin before exceptional items of 4.0-4.5 percent this year -- below its own target of close to five percent -- but said it hoped to boost this to six percent by 2005/6. It said it aimed to cut its debt to between 2.0 billion and 2.5 billion euros by March 2005 from 5.3 billion in March 2002, depending on how much the capital increase raised. To raise cash fast, Alstom said last March it aimed to raise 2.1 billion euros in non-core asset sales and a capital increase by this month. But the drastic measures announced on Wednesday suggest the firm was unable to meet that target and was forced to take more serious steps which will alter the very identity and make-up of its business. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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