Alstom bullish despite fall in sales Shares in Alstom, the French engineering group, rose more than 7 per cent in early Paris trading as investors welcomed a bullish forecast from Patrick Kron, the company's chief executive. Mr Kron said he was a confident that a recent recovery in orders would continue "strongly" in the first three months of 2012. Alstom said, however, that orders and sales fell in the last three months of 2011 as reduced government spending weighed on its train-making, power grid and renewables businesses. The group's statement is being watched closely because it is the first of the big European capital goods groups to report how it has been performing over the turn of the year, a key period during which economists expect much of Europe to return to recession. Siemens, Europe's largest engineering company, has forecast that it may be difficult to hit its target of matching 2011 profits this year as the stalling economy restricts demand for industrial equipment. Alstom received €4.9bn of orders in the three months to December, compared to €5.5bn in the same period in 2010. Sales were €4.87bn, down from €5.24bn. However, the company's management pointed to the fact that sales had increased for each of the first three quarters of its financial year, which runs until April 1. The company has been suffering from weaker demand following the financial crisis of 2008/2009 but Mr Kron said sales and orders had recovered for this financial year. "With orders close to €5bn, the third quarter 2011/12 extended the positive trend observed since the middle of last fiscal year," he said. We expect a strong fourth quarter of orders. Concerning sales, we anticipate the fourth quarter to show a marked progress over the previous ones. Nevertheless, analysts at Bernstein said investors were "still very concerned" about free cash flow generation at the company and the strength of its balance sheet. The company said it would achieve positive free cash flow in the second half of the current fiscal year. It also said it had signed a new syndicated revolving credit facility of €1.35bn with a 5-year maturity. Moody's, the investment rating agency, this week downgraded Alstom to Baa2 from Baa1, because of a "deterioration in its working capital levels," though it stressed that the company's liquidity was adequate. Alex Verbov, a Moody's analyst, said the downgrade was driven by "factors such as start-up local production needs, customer disputes and delays in orders." It was also, he added, "a result of Alstom's changing geographical sales split and product/service split with resulting pressure on payment terms." Like many engineering companies, Alstom is shifting a large part of its effort towards emerging markets. Western Europe and North America accounted for just 39 per cent of orders in the nine months to December and 49 per cent of sales.