Alstom’s board has approved on July 4 its strategic plan “Alstom in Motion 2025” (AiM 2025) which will focus on capturing the strong market growth opportunities and reinforcing further the innovation leadership of the company as well as driving efficiency throughout the new organisation and ensuring the successful integration of Bombardier Transportation.
“Our Alstom in Motion 2025 strategy is our answer to the historical acceleration of sustainability and green mobility need all over the world. By 2025 we will have outgrown the rail industry significantly and set new industry standards for smart and green mobility in terms of sustainability, innovation, and profitability,” Henri Poupart-Lafarge, Alstom Chairman and Chief Executive Officer said.
Alstom enters in a new chapter of its history with the acquisition of Bombardier Transportation closed in January 2021. The company reports good progress on the four AiM priorities.
1.Growth by offering greater value to customers. Alstom expects to outgrow the market significantly with a sales growth over 5% CAGR and expand its global market share by 5 percentage points. Regarding market presence, more than 70% share of the Group sales are in North America and Europe, two regions that will benefit from strong stimulus packages. With the Bombardier Transportation acquisition, the company is also strengthened significantly its industrial and commercial assets in Germany, North America, United Kingdom and Nordics, and plans to further develop in these geographies.
Alstom says that Signalling and Services will continue to have the fastest growth potential and, on this segment, intends to become a market leader by 2025 benefiting from its technological leadership in ETCS. In Services, Alstom targets to grow at solid mid-single digit, leveraging on the widest installed base of the industry with, 150,000 vehicles, the most extensive depots network and 15,000 highly skilled service employees. In Rolling Stock, Alstom will focus most particularly on increasing competitiveness and profitability.
2.Innovation by Pioneering Smarter and Greener Mobility for All. Alstom expects to invest EUR 550-600 million per year for R&D activities, representing around 3% of its annual sales. The company intends to continue the projects for a smart, green, inclusive and healthier mobility. For Smart Mobility, the group aims to have fully autonomous trains prototypes for freight and passengers ready by 2023. The company will also be able to leverage data from the 35,000 vehicles currently maintained and can count on its 7,500 software engineers and systems architects working on digital mobility solutions to further advance its offering to enable fully connected metros, trams as well regional trains.
3.Efficiency at scale, Powered by Digital. By 2025, Alstom will drive the digital transformation by deploying its digital suite to reach 100% group wide, leverage its scale to invest and accelerate and increase digitalization of its processes by 20%. The Group will drive continued project management excellence in order to achieve a Net Promoter Score of 8.3, implement systematic cash focus in projects, and extend best practices to lower hard inventories by 20%.
4.One Alstom Team Agile, Inclusive and Responsible. The Group reiterates its Corporate Social Responsibility convictions to aim for carbon neutrality in transport and increase social equity and inclusion by increasing the availability and efficiency of public transport. The Group extended its ESG 2025 targets and will bring this to the scope of the new organisation. Enabling mobility decarbonisation is among company’s priorities and involves a 25% energy reduction in solutions, 100% of newly developed solutions eco-designed and 100% electricity supply from renewables. Alstom committed to science-based CO2 emissions reduction targets within the frame of the Paris Agreement. To carry its people, Alstom plans to increase the share of women’s role in management, engineering & professional to 28% and to reach a total recordable injury rate at 2.
Relating to Bombardier Transportation integration, Alstom secured the product and process convergence roadmaps and the organisation is now operating under one unified IT system. The Group also achieved its first significant commercial wins from the combined strength of the portfolio and expanded geographical footprint resulting in around EUR 6 billion of orders in the first quarter of the current fiscal year.
The current fiscal year 2021/22 will be a transition year, focused on the stabilization of the Bombardier Transportation challenging legacy projects. During H1 2021/22 free cash flow is expected to be between (EUR 1.6 billion) and (EUR 1.9 billion) impacted by working capital consumption due to phasing, industrial ramp-up and project stabilization efforts. In H2 2021/22, the company expects positive free cash flow driven by increased deliveries and operations stabilization. Overall, this should result in significant negative free cash flow in 2021/22.
The Alstom in Motion 2025 strategy underlines that Alstom estimates that its sales will grow at over 5% CAGR during the period 2021/22 to 2024/25, supported by strong market momentum and unparalleled EUR 74.5 billion backlog securing EUR 30 billion of sales over the next three years. Rolling stock should grow above market rate, Services at solid mid-single digit path and Signalling at high single digit path.
The adjusted EBIT margin should reach between 8% and 10% from 2024/25 onwards, benefiting from operational excellence initiatives, the completion of the challenging projects in backlog while synergies are expected to deliver EUR 400 million run rate between 2024/25 and 2025/26;