DSB train interior (Photo: Talgo)

Talgo sees rising revenue and bulging backlog in second half of 2023

DSB train interior (Photo: Talgo) Talgo

In the initial nine months of 2023, revenues for Talgo surged to 470.3 million euro, marking a substantial 33.5 percent rise compared to the corresponding period in the preceding year. This notable upswing is primarily attributed to heightened industrial activity. Talgo discloses that its latest contracts, valued at over 1.9 billion euros, have been instrumental in propelling the order backlog to 4.2 billion euros.

During the preceding reporting period, Talgo observed a commendable 32 percent increase in net profit, reaching a total of 7 million euros. The revenue figure for the first half of the year amounted to 289 million euros, denoting a 33 percent augmentation in comparison to the analogous period in 2022. Notably, the company, which held an order backlog of 2.7 billion euros nine months earlier, attributes its recent revenue growth to heightened manufacturing operations and contract extensions with prominent European rail operators such as Germany’s Deutsche Bahn (DB) and Denmark’s DSB. The ongoing project for the manufacturing and overhaul of trains for Renfe, constituting the 107 series, along with consistent revenue streams from maintenance services, further contributed to the revenue surge through September.

Talgo recorded an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of 64.5 million euros in the initial nine months of 2023, showcasing a substantial 68 percent increase compared to the same period in the previous year. This surge in adjusted EBITDA during the third quarter can be attributed to the stabilisation of operating margins and extraordinary income generated from contract extensions. The company successfully elevated its margins to 13 percent, surpassing the 10.9 percent recorded in the corresponding period of 2022 and exceeding the 2023 forecast. Despite these positive developments, Talgo remains cautious, citing macroeconomic and geopolitical uncertainties as potential factors impacting project performance, particularly in terms of the supply chain and financial costs.

Forwards trajectory

Talgo has witnessed a robust upward trajectory in its commercial endeavours, resulting in a record-high order backlog of 4.2 billion euros. This surge is attributed to the acquisition of over 1.9 billion euros in new orders within the initial nine months of the year. Notably, maintenance services constitute 46 percent of the present order backlog. Among the significant international ventures during this period are contract extensions with European rail operators such as Deutsche Bahn and the Danish DSB. Additionally, the extension of the maintenance contract for Spain’s high-speed train fleet, known as S130/730, played a pivotal role. Furthermore, the imminent activation of a 280 million euros contract with the Egyptian operator ENR for the production of seven night trains is contingent upon the fulfilment of specific precedent conditions.

These favourable outcomes have prompted Talgo to revise its projections for 2023, encompassing enhancements in revenues, operating margins, and backlog execution. Notably, the company has adjusted its EBITDA forecast from 12 percent to 13 percent. Affirming a book-to-bill ratio of 3.5 times underscores the positive commercial momentum experienced by Talgo. Additionally, the company is actively pursuing diverse opportunities in its pipeline, collectively valued at over 10 billion euros. Talgo anticipates realising some cost savings in terms of capital expenditure investments.

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Author: Emma Dailey

Emma Dailey is an editor at RailTech.com and RailTech.be.

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