Alstom cuts free cash flow target as production ramps up, order delays weigh

(This Oct. 4 story has been corrected to change the cash outflow range figure to 500-750 mln euros, not 500-700 mln euros, in paragraph 2)

(Reuters) - French train manufacturer Alstom on Wednesday said its full-year free cash flow would be negative due to a ramp-up in production and delays in some orders.

The maker of France's TGV trains now projects a full-year negative free cash flow (FCF) in a range of 500 million euros ($526 million) to 750 million. Alstom had previously guided for it to be "significantly positive".

The group said its half-year FCF - published preliminarily on Wednesday - came in at a negative 1.15 billion euros, which meant it had to cut the full-year target.

"We are engaged in a steep ramp-up, in particular in the rolling stock activity. This, combined with legacy projects being finalised at the same time, is weighing on the free cash flow in this first half," it said in a statement.

The trainmaker also referenced a tight supply chain, a delay in the completion of the Aventra program in the United Kingdom, and a significant increase in inventories.

"While in theory this is largely a timing issue, and there is no liquidity concern...Alstom's prior track record on FCF volatility means we'd initially expect a very negative reaction," Citi analysts said in a note to clients.

Half-year orders fell to 8.4 billion euros, from 10.1 billion in the same period a year earlier, Alstom said, adding it expects improvement in the second half of the fiscal year.

Preliminary sales were 8.3 billion euros in the half-year, up slightly on the 8.0 billion recorded a year earlier.

The group also confirmed its full-year target for an adjusted EBIT margin of around 6% and reiterated its mid-term guidance.

($1 = 0.9512 euros)

(Reporting by Olivier Sorgho; Editing by Jane Merriman and Lisa Shumaker)