By Natalie Huet
PARIS (Reuters) - French engineering firm Alstom
The company, which also makes high-speed trains and wind turbines, said orders fell 12 percent in the first nine months of its fiscal year and warned it would keep burning through cash in the second half after draining 511 million euros in the first.
Nomura analyst Daniel Cunliffe said Alstom needed to cut its dividend to zero - market expectations are for a 250-million-euro payout - but may also have to launch a rights issue or sell a bigger stake than planned in its transport unit to fill the cash hole.
"The bigger the miss in their cash flow, the bigger the stake they need to sell and the more dilutive it is earnings," he said.
Shares in Alstom were down 13 percent at 0823 GMT, close to a two-year low and the biggest drop on France's CAC 40 index <.FCHI>. Shares in Bouygues
Like rivals Siemens
In some European countries, government caps on power bills and competition from renewable energy have made traditional power stations fired by coal or gas less profitable.
In November, Alstom announced around 1,300 job cuts and said it would sell up to 2 billion euros ($2.71 billion) of assets to raise cash.
The company maintained a full-year forecast of low-single digit sales growth from existing businesses, but it said it now expected its operating margin - a measure of profitability - to dip slightly to around 7 percent this year, before declining sightly in 2015.
It had earlier aimed for positive free cash flow for the year and a stable operating margin of around 7.2 percent, which it would try to improve to 8 percent within three years.
"In this difficult environment, our focus remains on the implementation and acceleration of the ambitious cost savings initiatives which have been launched", CEO Patrick Kron said in a statement.
Representatives of Alstom could not immediately be reached for comment. A call with analysts is scheduled at 0900 GMT.
Moody's cut Alstom's long-term credit rating last June to Baa3, one notch above "junk". Standard & Poor's, which rates Alstom BBB, has warned it may also downgrade its debt.
As part of its divestment programme, Alstom is looking to sell a minority stake in its transport unit, which makes France's prized high-speed TGV trains and has been a rare bright spot through a succession of bleak results.
In the third quarter, the transport unit booked a record 2.57 billion euros in orders, driven by a 1.2 billion contract to equip Riyadh's subway. The strong performance helped offset a 4 percent drop in orders in thermal power.
Group orders stood at 5.62 billion euros in the third quarter, up 11 percent from the same period a year ago. Nine-month sales fell 1 percent to 14.53 billion euros, while on an organic basis they were up 3 percent. ($1 = 0.7373 euros)
(Editing by Leila Abboud and Tom Pfeiffer)