French Train Maker Alstom Slumps on Russia Venture Concerns
French Train Maker Alstom Slumps on Concern About Russia Venture
(Bloomberg) -- Rail-equipment maker Alstom SA’s shares continued on a downward spiral on Monday on worries about its long-held stake in a Russian manufacturer, adding to a growing list of companies under pressure because of their partnerships in the country.
Alstom’s stock dropped 5.7% in Paris trading on Monday to the lowest level since June 2016. The French company, which is the world’s second biggest producer of products like rail cars and signaling systems, has lost nearly a quarter of its market value since Russia invaded Ukraine.
Investor concern centers around Alstom’s 20% stake in Transmashholding, a manufacturer known as TMH that is the biggest supplier of rolling stock to Russia’s railways, according to its website.
The TMH stake added “significantly” to Alstom’s bottom line, according to Bloomberg Intelligence. The 44 million euros ($48 million) in the last fiscal year compares with the company’s adjusted net profit of 301 million euros, it said.
Alstom is among a raft of companies worldwide facing tough decisions about doing business in Russia. While a range of firms from oil drillers and credit card companies to carmakers have already exited or pulled back operations, some French firms with longstanding ties like energy giant TotalEnergies SE and carmaker Renault SA haven’t changed tack.
French Finance Minister Bruno Le Maire on Monday said private companies are free to take their own decisions on whether to keep doing business with Russia as long as they “strictly and rigorously adhere to sanctions.”
A spokeswoman for Alstom said Russian revenue represents less than 0.5% of group consolidated revenue.
“We are obviously reviewing the situation including the impact of sanctions and the reputational issue,” the company said in a statement. The spokeswoman said the value of the TMH stake in the first fiscal half earnings report was 482 million euros.
What Bloomberg Intelligence Says:
‘Offloading ownership of subsidiaries or investments could prove more difficult as potential buyers from Europe and the U.S. would also follow sanctions. Earnings in the rolling-stock sector can be volatile.’
--Mustafa Okur, industrials analyst
Click here to read the research.
Alstom signed a memorandum of understanding last month for an order of 130 electric locomotives for the Ukrainian railway, the spokeswoman said. The contract was supposed to be finalized in the coming months and the equipment manufactured at a French factory.
The Alstom-TMH venture’s production and sales are mostly for the Russian market, according to Alstom.
Alstom Chief Executive Officer Henri Poupart-Lafarge was a director at TMH for seven years through 2019, but is no longer on the board.
The partnership dates back to 2010 when a deal for the French company to take a stake in TMH was overseen by former Russian President Dmitry Medvedev and his French counterpart Nicolas Sarkozy. It was finalized a couple of years later when the rail maker made its final payment.
In 2015, the French manufacturer said it was already considered a local player on the Russian railway market.
Alstom has said the European market is driven by growth in Russia, Germany and Italy.
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