Form 6-K
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2003
Commission File Number: 1-14836
ALSTOM
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(Translation of registrant's name into English)
25, avenue Kléber, 75116 Paris, France
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(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes No X
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes No X
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Indicate by check mark whether the Registrant, by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the Registrant in
connection with Rule 12g3-2(b)
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
REGISTRATION STATEMENTS ON FORM S-8 OF ALSTOM (NO. 333-10658, NO. 333-12028 AND
333-90154) AND THE RELATED PROSPECTUSES AND TO BE PART THEREOF FROM THE DATE ON
WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR
REPORTS SUBSEQUENTLY FILED OR FURNISHED.
ENCLOSURES:
Press release dated March 12, 2003 "ALSTOM Presents New Action Plan"...........3
12 March 2003
ALSTOM PRESENTS NEW ACTION PLAN
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|_| IMMEDIATE ACTIONS TO REDUCE DEBT AND IMPROVE PERFORMANCE
o Disposal programme extended: €3bn to be raised by March 2004, including
Transmission & Distribution Sector and Industrial Turbines business
o Cost reduction plans accelerated: annual savings of €500m within 2 years
o Management team and organisation renewed
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|_| NET LOSS EXPECTED FOR FISCAL YEAR 2002/03
o Estimated additional provision of €1.35bn before tax (€1.2bn after tax) in
2002/3 accounts to cover GT24/26 and UK train problems
o Estimated net loss of between €1.3-1.4bn in 2002/03
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|_| FINANCIAL POSITION
o Adequate liquidity: €1bn of available credit lines
ALSTOM is today hosting a presentation in Paris for investors and analysts at
which Patrick Kron, Chairman & Chief Executive Officer, will detail ALSTOM's new
action plan. The plan is designed to: improve the Company's operational
performance; deal with the impact of past operational issues; and reduce its
high level of debt.
Patrick Kron commented: "ALSTOM's core businesses in the global energy and
transport markets offer solid long-term growth prospects and attractive
opportunities. With its strong market positions, technology leadership, broad
commercial presence and large installed base, the Company is strategically
well-positioned.
"However, we must face today's reality. 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.
"This situation calls for immediate action. We will refocus the Company by
selling both our Transmission & Distribution and Industrial Turbines businesses
which, taken together with other assets already sold during the past year or
about to be sold, should generate €3 billion in proceeds, including real estate
- double the target set this time last year. We are taking strong action to
improve our inadequate profitability by substantially reducing our cost base,
generating €500 million in annual savings within the next two years through
industrial restructuring and overhead reduction programmes.
"We have thoroughly reviewed the impact of operational problems with our GT24/26
gas turbines and in UK trains: we will put these problems behind us, but we need
to make an additional provision estimated at €1.35 billion to cover the
associated costs.
"We estimate that the business disposal programme, combined with measures to
improve our operational performance, will halve our total debt by March 2005.
Our leading lending banks have given their full support to this plan and, with
€1 billion in available credit lines, we have adequate liquidity going
forward.
"Rapid implementation of this plan is my top priority. My conviction is that,
with a restructured industrial base and strong market positions in power and
transport, supported by a worldwide commercial presence and highly-competent
technical teams, ALSTOM has a promising future. We have renewed the management
team and are streamlining the organisation to make this happen."
* * * * *
MARKET CONDITIONS
In the power market, conditions have deteriorated markedly in the past year,
particularly in the US. This downturn affects about half of our Power portfolio,
particularly gas and steam turbines and related plant engineering, but we are
still seeing growth in service, retrofit and environment-related markets. The
Transmission & Distribution markets have weakened in medium voltage and
systems. The rail transport market is at high levels. The cruise ship market
remains uncertain, pending an overall economic recovery and the resolution of
the current international situation.
DEALING WITH PAST ISSUES
o GT24/26 HEAVY-DUTY GAS TURBINES
Major progress has been made in developing the technical recovery package on the
GT24/26 heavy-duty gas turbines, following the announcement in July 2000 that
the machines could not meet contractual performance and lifetime obligations.
Commercial settlements have been reached on 61 of the 80 units sold, of which 20
are unconditional (i.e. contracts are in the normal warranty period and ALSTOM
has no obligation to upgrade or pay further penalties) and 41 require additional
improvements, either to performance or to the lifetime of key components. Of the
19 units on which commercial settlements have not been reached, seven are
currently subject to litigation and negotiations are underway on the remainder.
However, since November 2002, as a consequence of delays experienced in
finalising the technical recovery package, coupled with the tougher than
expected commercial attitude of customers, ALSTOM is facing extra costs and
significantly increased exposure.
We estimate the remaining exposure in March 2003 to be €1.6 billion.
Maximum exposure is estimated at €2.0 billion, on which the Company expects
mitigation of €400 million (20 per cent). We therefore expect to take an
estimated additional provision of €1.2 billion before tax in the Company's
accounts for the current financial year, in addition to an existing estimated
provision at end-March 2003 of €400 million.
o UK TRAINS
All trains under the UK regional contracts have been delivered, but a programme
to improve the trains' reliability is ongoing and leading to additional costs.
Trains are also being delivered on the West Coast Main Line (WCML) contract at
the rate of two units per month, in line with customer requirements. Services on
the line began in January 2003 and the remaining 41 trains are scheduled for
delivery by September 2004, but there have been major delays and cost-overruns
on this contract.
Decisive action has already been taken to address these issues, including
strengthening management and optimising resources for new-build and service
functions in the UK. Following a comprehensive review of costs, we expect to
take an estimated additional provision of €150 million in the Company's
accounts for the current year.
o MARINE VENDOR FINANCING
ALSTOM's total gross exposure on Marine vendor financing has reduced to
€900 million, largely due to currency effects. The Company believes it has
adequate provisions in its accounts, provided there is no further deterioration
in the cruise-ship holiday market.
o ASBESTOS
The Company reiterates that it believes it has no material liability in respect
of asbestos personal-injury cases. In France such liabilities are covered by
publicly-funded systems. In the USA the businesses purchased from ABB are
covered by an ABB indemnity. For its other US businesses, ALSTOM believes its
exposure is insignificant and considers the cases filed against the Company are
without merit. Currently, the Company has 80 asbestos cases, grouping a total of
6,200 asbestos claims, following the filing of new cases and the dismissal of
others. ALSTOM has made no compensation payments.
ACTION PLAN
The action plan comprises three main elements:
1. Focus ALSTOM's range of activities, while strengthening its financial base
EXTENDED DISPOSAL PROGRAMME TO GENERATE PROCEEDS OF €3 BILLION
ALSTOM will refocus its activities on the power generation and transport markets
by selling the Transmission & Distribution Sector (T&D) and the Industrial
Turbines business. In all, the extended disposal programme is expected to
generate proceeds of €3.0 billion by March 2004, nearly double the previous
target of €1.6 billion.
The sale of the T&D Sector has been prepared and is launched today. The sale of
the Industrial Turbines business, which comprises small gas and steam turbines,
was launched five months ago and is nearing signature. Together, these
businesses have sales of €5.0-5.5 billion, operating income of €320 million and
around 35,000 employees.
The decision to sell T&D and the Industrial Turbines business was taken after
a thorough review and appraisal of ALSTOM's current portfolio: both are good,
high-value businesses, but their sale will not impact the remaining activities.
ALSTOM will also review options to consolidate its Marine activities in the
medium term through partnerships or alliances at either national or
international level.
2. Improve operational performance and adapt to market conditions
COST REDUCTION: €500 MILLION OF ANNUAL RECURRING SAVINGS WITHIN 2 YEARS
All existing cost-reduction initiatives will be accelerated, while new overhead
reduction targets will be assigned at Corporate, International Network and
Sector levels. Corresponding industrial restructuring plans and overhead
reduction programmes will be announced in the Sectors and countries affected
over the coming weeks. Annual restructuring costs will be increased from
€200 million to €300 million and the Company expects to extract recurring
annual savings of €500 million within two years.
3. Overhaul of organisation and management
IMMEDIATE ACTION WILL BE TAKEN TO IMPLEMENT A MORE EFFICIENT ORGANISATION
o The Power Sector, which currently accounts for more than half of ALSTOM's
revenues, will be reorganised into 3 new Sectors: Power Turbo-Systems (the
former Gas and Steam Segments); Power Service (the former Customer Service
Segment); and Power Environment (the former Boilers & Environment and Hydro
Segments). ALSTOM will thus comprise five more equally-balanced Sectors,
plus the T&D Sector pending its disposal.
The Company's senior management will be renewed, with five newcomers joining
ALSTOM's Executive Committee. Alexis Fries, former Power Sector President
and Michel Moreau, former Transport Sector President, are leaving the
Company. The following new Sector Presidents will join the Executive
Committee: Mike Barrett, Power Turbo-Systems; Walter Graenicher, Power
Service; Philippe Soulié, Power Environment; and Philippe Mellier,
Transport, who will join the Company on 1 May 2003 from the Volvo group. A
new head of the Human Resources function will join the Executive Committee
in the near future.
o Sectors will be fully empowered, with clear P&L responsibility, and a
fast-track reporting system will be implemented. Stricter risk management
will be enforced by the Corporate Risk Committee chaired by Patrick Kron,
which will review major tenders and execution of large projects and analyse
the Company's customer and country risk exposure. The organisation will be
delayered and simplified to enhance reactivity.
KEY FINANCIALS
Outlook for fiscal year 2002/03
ALSTOM will announce its fiscal year 2002/03 results on 14 May, 2003. ALSTOM's
current outlook is:
o Sales at approximately €21bn, stable versus last year on a comparable basis
o Orders reviewed at approximately €19bn, a decrease of 4% versus last year
on a comparable basis
o Operating margin, pre-exceptionals: in the 4-4.5% range, slightly up from
the previous year
o Exceptional estimated additional provision of €1.2bn after tax comprising:
- Estimated provision on GT24/26 of €(1,200)m
- Estimated provision on UK trains of €(150)m
- Estimated tax impact of €150m
o Estimated net loss of €1.3-1.4bn
o Estimated free cash flow (net cash provided by operating activities after
capex) of €(0.4)-(0.5)bn, after more than €1.0bn cash outflow linked to
GT24/26
o Total debt at March 2003 estimated at slightly below €5bn, reduced from
€5.3bn in March 2002, which included net financial debt of €2.1bn,
securitisation of existing receivables of €1.0bn, securitisation of future
receivables of €1.7bn and €0.5bn of preferred shares and undated
subordinated notes
o Dividend: in view of the financial plan outlined today, the Board will
propose for this financial year not to pay any dividend
New credit lines
ALSTOM's liquidity needs are adequately covered. The Company's main lending
banks have agreed to extend a new credit facility of €600 million and to renew
€475 million of existing facilities maturing in the coming weeks, all of which
is to be repaid from the disposal proceeds. They have also agreed to modify
existing financial covenants. Discussions with ALSTOM's other banks are underway
to obtain their required consents to such new financial covenants. The Company
is confident of obtaining the necessary consents. Failure by the shareholders to
approve a planned capital increase will allow the banks to require repayment of
the new €600 million credit facility and the €475 million of existing
facilities.
ALSTOM IN 2005/06: FOCUSED ON POWER GENERATION AND RAIL TRANSPORT
Following the disposals, the new ALSTOM will have a balanced portfolio of
well-positioned activities:
Power Turbo-Systems No. 1* in steam turbines, generators and plant
engineering & construction, while recovering its
position in gas turbines
Power Service No. 1* in an attractive and growing business
Power Environment No. 1* in boilers, hydro and environmental control: a
clear leader in growing environmental markets
Transport No. 2* with a world-class business
Marine Leading cruise ship supplier; need for industry
consolidation
* ALSTOM estimates
New ALSTOM Profile
o Sales of over €15 bn
o Operating margin of 6% by 2005/06
o Free cash flow strongly positive
o Total debt to be reduced from €5.3 billion in March 2002, to a level in the
range of €2.0-2.5 bn by March 2005
Press enquiries : Gilles Tourvieille /Maria Dowd
(Tel. +33 1 47 55 23 15)
internet.press@chq.alstom.com
Investor relations : Elisabeth Rocolle-Teyssier
(Tel. +33 1 47 55 25 78)
investor.relations@chq.alstom.com
Internet : http://www.alstom.com
This press release contains, and other written or oral reports and
communications of ALSTOM may from time to time contain, forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of such
forward-looking statements include, but are not limited to (i) projections or
expectations of sales, income, operating margins, dividends, provisions, cash
flow, debt or other financial items or ratios, (ii) statements of plans,
objectives or goals of ALSTOM or its management, (iii) statements of future
product or economic performance, and (iv) statements of assumptions underlying
such statements. Words such as "believes", "anticipates", "expects", "intends",
"aims", "plans" and "will" and similar expressions are intended to identify
forward looking statements but are not exclusive means of identifying such
statements. By their very nature, forward-looking statements involve risks and
uncertainties that the forecasts, projections and other forward-looking
statements will not be achieved. Such statements are based on management's
current plans and expectations and are subject to a number of important factors
that could cause actual results to differ materially from the plans, objectives
and expectations expressed in such forward-looking statements. These factors
include: (i) the inherent difficulty of forecasting future market conditions,
level of infrastructure spending, GDP growth generally, interest rates and
exchange rates; (ii) the effects of, and changes in, laws, regulations,
governmental policy, taxation or accounting standards or practices; (iii) the
effects of competition in the product markets and geographic areas in which
ALSTOM operates; (iv) the ability to increase market share, control costs and
enhance cash generation while maintaining high quality products and services;
(v) the timely development of new products and services; (vi) the inherent
technical complexity of many of ALSTOM's products and technologies and the
ability to resolve effectively and at reasonable cost technical problems that
inevitably arise, including in particular the problems encountered with the
GT24/26 gas turbines and the UK trains; (vii) risks inherent in large contracts
that comprise a substantial portion of ALSTOM's business; (viii) the effects of
acquisitions and disposals; (ix) the ability to invest in successfully, and
compete at the leading edge of, technology developments across all of ALSTOM's
Sectors; (x) the availability of adequate cash flow from operations or other
sources to achieve management's objectives or goals; (xi) timing of completion
of the actions focused on cash generation contemplated in ALSTOM's Strategic
Plan; (xii) the inherent difficulty in estimating future charter or sale prices
of any relevant cruise ship in any appraisal of the exposure in respect of the
Renaissance Cruises matter; (xiii) the inherent difficulty in estimating
ALSTOM's exposure to vendor financing which may notably be affected by
customer's payment default; (xiv) the unusual level of uncertainty at this time
regarding the world economy in general; (xv) ALSTOM's ability to dispose of its
Transmission and Distribution and Industrial Turbines businesses on favourable
terms or in a timely fashion, (xvi) the availability of sufficient levels of
credit lines from our banking institutions; and (xvii) ALSTOM's success at
adjusting to and managing the risks of the foregoing. The foregoing list is not
exhaustive; when relying on forward-looking statements to make decisions with
respect to ALSTOM, you should carefully consider the foregoing factors and other
uncertainties and events, as well as other factors described in other documents
ALSTOM files from time to time with the U.S. Securities and Exchange Commission,
including reports submitted on Form 6-K. In particular, our financial year
ending March 31, 2003 has not yet come to a close and the process of
consolidating our group's financial statements will not be completed for several
weeks. Nothing contained in this press release should be construed as a
definitive statement regarding our financial condition or results of operations
at or for the year ended March 31, 2003. Forward-looking statements speak only
as of the date on which they are made, and ALSTOM undertakes no obligation to
update or revise any of them, whether as a result of new information, future
events or otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALSTOM
Date: March 13, 2003 By: /s/ Philippe Jaffré
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Name: Philippe Jaffré
Title: Chief Financial Officer