European train maker Alstom SA (AOMFF) has cancelled its quarterly dividend payment to shareholders as its financial situation continues to deteriorate.
The company’s stock fell 22% on news of the dividend cut, as well as an announcement of a workforce reduction and a possible equity raise by the French train company.
Alstom has struggled since it purchased the rail business of Canada’s Bombardier (BBD.B) for $5.5 billion nearly three years ago.
In October of this year, Alstom lowered its full-year forecast for free cash flow due to a rise in inventories and delays in a major British rail project.
Alstom now says that it will cut around 1,500 jobs across its operations and cancel its quarterly dividend payment to conserve cash.
The company previously paid shareholders a dividend of €0.06 (Cdn$0.09), giving it a yield of 2.12%.
With the cuts, Alstom said it aims to reduce its net debt by €2 billion (Cdn$2.97 billion) by March 2025. The job cuts represent close to 10% of the company’s sales and administrative positions. Engineering and factory workers are not impacted by the headcount reduction.
Alstom executives blame the financial troubles on costly legacy contracts that they inherited from Bombardier’s rail business, and have cited mismanagement on the part of Bombardier for delivery delays and heavy spending needed to complete older contracts.
In October, Alstom delayed a British project it inherited from Bombardier that includes the delivery of 443 trains needed to service lines such as the London Overground.
Alstom’s stock has declined 50% this year to trade at €11.78 (Cdn$17.51) per share.