UK train snags slow down Alstom

ANGLO-French engineering giant Alstom today warned that meeting its profit targets would be 'challenging' next year after problems with UK train contracts and the global economic slowdown hit first-half results.

Blighted by a cash outflow of e421m (£260m) in the first six months, the world-leading power engineering group is stepping up cost cutting and restructuring.

It will start by reducing overheads, selling properties and speeding up its review of non-core businesses. The aim, said chairman Pierre Bilger, is to 'stabilise our debt and then reduce it substantially by the end of March 2003'.

The shake-out comes after a first half in which net income fell by 11% to e92m (£56.8m)despite a 12% rise in sales to e11.9bn (£7.35bn) and orders ahead 22% at e13.2bn (£8.15bn).

The UK trains business, inherited from its one-time parent General Electric Company, is playing up. First-half operating profits in the transport division fell 17% to e88m (£54.3m), largely due to difficulties with five contracts for Juniper and Coradia trains for British operators.

According to spokesman Gilles Tourvieille, Alstom delivered only 75 of 119 coaches ordered because of delays in safety approval and customer demands that the Alstom rail works in Birmingham carry out modifications to improve quality.

Bilger said the insolvency of Railtrack, owner of Britain's railway lines and stations, had no impact in the first half, but he did not rule out problems later.

Meanwhile, Alstom struggles to overcome design problems in its gas-powered turbines. The collapse of US cruise ships operator Renaissance, a customer of Alstom's French shipyards, has obliged a provision of e110m (£67.9m), and focused attention on financing guarantees to shipowners totalling e1.74bn (£1.07bn), or 80% of shareholder funds.