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General Electric
Co.
GE -1.24%
has reduced its dividend to a nominal amount and said federal regulators had opened a criminal investigation into its accounting practices as the struggling conglomerate sought to restructure under new CEO Larry Culp.
Officials said Tuesday that the Justice Department had opened an investigation into the company's recent accounting practices, alongside an ongoing investigation at the Securities and Exchange Commission. GE also said the SEC had broadened the scope of its investigation.
The Department of Justice and the SEC are both investigating a $ 22 billion charge that the company recorded in the third quarter and related to GE's block purchases, as well as a charge of $ 6 billion. billion in the first quarter for lack of insurance reserves, said GE's chief financial officer, Jamie Miller. told investors during a conference call Tuesday.
GE announced a net loss of $ 22.8 billion in the third quarter due to the $ 22 billion charge, highlighting the magnitude of the problems the company faces. Culp took office Oct. 1 after GE ousted his CEO and warned that he would miss his cash and profit targets for the year. GE did not release a financial forecast as of Tuesday, but the executives told GE it would severely miss its previous goals.
Investors had been preparing for a further reduction in the company's once-reliable dividend. The new quarterly dividend of the company will be 1 cent per share, instead of 12 cents. This measure will save the company about $ 3.9 billion a year and will be a reversal for a company that was once one of the most generous dividend payers.
GE, once a powerful industrial giant, saw a drop in sales and profits in the past year that forced the conglomerate to separate and hire an external CEO. However, while plans for the sale or splitting of three main units are underway, GE's core business in the energy sector has continued to deteriorate.
Electric unit sales fell 33% in the last quarter to $ 5.74 billion and the unit turned into an operating loss. Overall, GE said its revenue was down 4% to $ 29.57 billion in the third quarter, as growth in its aerospace and energy businesses partially offset the decline in revenue. energy.
Excluding expenses, GE announced a profit of 14 cents per share. On that basis, Wall Street was expecting an adjusted profit of 20 cents per share for a turnover of $ 29.92 billion, according to Thomson Reuters.
When he changed CEO earlier this month, GE warned that past acquisitions in the energy sector would result in a book load of up to $ 23 billion. It manufactures turbines producing electricity in power plants. This century-old company has suffered heavy losses due to the global decline in demand for power generation equipment.
The Power division, which represented GE's largest sales, was at the center of GE's financial and operational challenges. The unit has removed thousands of jobs to adapt to the market, but GE said it will take years to get the division back on track. GE announced Tuesday that it would reduce additional costs by consolidating the company's functions within the food unit.
GE has reduced its dividend while the amount of cash generated by its business and other industrial activities of the company has dried up. In the first nine months of the year, the industrial sector generated a negative adjusted cash flow of $ 335 million. Previously, GE had forecast cash flows of approximately $ 6 billion for the year, up from $ 9.7 billion last year and $ 11.6 billion in 2016.
GE has not updated the cash flow or financial objectives of the company for the full year. Culp said the company would provide an update to investors early in 2019.
GE has announced its intention to divide the power generation division into two units, one for its natural gas turbines and associated services, and another unit including steam and nuclear power, as well as equipment and services. electricity distribution services.
Last month, GE revealed a flaw in its most recent turbines after a key element fails and the requirement for a utility provider.
Exelon
Corp.
to shut down two Texas factories. GE repairs the windmill park.
The aerospace business, which produces jet engines, remains the brightest point given the sustained demand for its latest model from companies such as
Boeing
Co.
and Airbus. GE said the unit's revenues jumped 12 percent to $ 7.4 billion and the industry's profits increased 25 percent. Equipment orders increased 35% over last year.
GE said it remained focused on "reducing and reducing GE Capital's debt," the company's financial services branch. GE has significantly reduced the division in recent years, but the latter has always been a source of problems, particularly with regard to the need to strengthen the insurance reserves of its $ 15 billion insurance portfolio.
The Boston-based company has already announced its intention to sell its transport company, which manufactures locomotives, and to create a health care unit, which manufactures MRI machines and hospital equipment. He also announced his intention to sell his 66% stake in
Baker Hughes
,
a service provider of oil fields.
In the third quarter, revenue and earnings for health care and transportation units were roughly flat compared to the previous year. GE announced Tuesday its intention to finalize the sale of its transport business to
Wabtec
Corp.
early 2019, but could close the sale earlier. He did not provide any update on the plans for the stake in Baker Hughes.
GE shares rose 4 cents to $ 11.20 in pre-market trading on Tuesday. The stock closed down to $ 11.16 Monday, down nearly 50% over the last 12 months. GE was excluded from the Dow Jones industrial average earlier this year.
Write to Thomas Gryta at [email protected]
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