GE's profit drops as Power division remains a brake

GE recently unveiled its roadmap for restructuring under the general direction

John Flannery,

a series of steps to dismantle the company in a complete breakdown of the former bellwether. GE plans to turn its health care unit into a separate corporation and abandon its controlling interest in an oil and gas firm for several years.

Baker Hughes

GE has entered into agreements in recent months to create a transportation division and sell several small businesses. He said Friday that his plan to sell $ 20 billion of assets is "substantially complete."

"The second quarter was important for GE," Flannery said during a conference call with analysts, noting that GE has cut costs. its industrial divisions of $ 1.1 billion in the first half. "We described 2018 as a rectified year and during the quarter we made significant progress on this trip."

Adjusted earnings of 19 cents per share for the period beat Wall Street expectations of 17 cents per share, according to Thomson Reuters. The $ 30.1 billion business figure also exceeded the consensus forecast of $ 29.3 billion.

Still, the company's shares were down 4.5%, or 61 cents, to $ 13.11. The stock has lost half of its value in the last 12 months. RBC Capital analyst Deane Dray said the challenges GE faces are not new, but that the company may have scared investors by pointing to potential downside risks in large areas such as energy division, financial services and commercial friction.

For example, the company had previously planned the sale of 50 to 55 gas turbines this year, but the expected Friday "about 50" for the year. He added that new rates could cost him $ 300 to $ 400 million a year and that he should offset at least half of that amount. GE Capital is expected to break even, but the company pointed out that it was an "approximate" estimate.

"It was obviously negative in the way they framed key assumptions," said Dray.

million. Flannery, who took the helm of GE last August, said the company "was meeting or beating our plan in every business except power."

He called this division, which uses turbines In the case of power plants, the biggest challenge facing the company is that the prolonged slowdown in this market is putting pressure on the cash flow and the fund rolling. "The market is tough but we need to fix it," said Flannery. "The division's sales figure fell 19% year-on-year to $ 7.6 billion, down 26%, while earnings declined 58%. Until now, he has sold 19 gas turbines up from 41 at the same time last year.The orders are generally firmer later in the year, Chief Financial Officer

Jamie Miller

says, but she noted that some new orders for massive machines have moved in the second half.

The sweetness of the order hits GE's cash flow because customer payments while the turbines are in production arrive more slowly when deliveries are delayed. Miller said in an interview.

GE continues to reduce costs in its operations and close down its facilities. Last year, he set out plans to cut 12,000 jobs in the division and has already eliminated 7,000 of those positions, Miller said. It reduced costs by $ 565 million in the first half of the year, which reduced the division by $ 1 billion by the end of the year.

GE reported net income of $ 615 million in the second quarter, down from $ 875 million a year earlier. Overall, GE said its revenue for the quarter ended June 30 was up 3% from $ 29.1 billion, largely due to the merger of its Oil & Gas business with Baker Hughes. a year ago. GE still holds a controlling interest in the merged company.

The company maintained its earnings guidance for 2018 from $ 1 to $ 1.07 per share; he said that he will likely reach the lower end of this range, and analysts currently forecast only 95 cents a share for the year. The estimate was given in November when the company revised its target of $ 2 per share for 2018. The company expects restructuring costs of $ 2.7 billion before taxes for 2018, a said Mrs. Miller

. free cash flow of about $ 6 billion for 2018, compared with an earlier forecast of $ 6 to $ 7 billion. The company is still waiting to close the year with at least $ 15 billion in cash.

GE reduced its dividend in November, only the second time since the Great Depression, and investors are focusing on its ability to generate cash. In the final quarter, it had adjusted its free cash flow by $ 258 million from its industrial operations, a $ 1.7 billion jump from the $ 369 million negative free cash flow from the fiscal year previous

. sales increased in the other two base units of GE, aviation and health.

In the aviation sector, which manufactures and maintains jet engines, sales increased by 13% and profit by 7%. The division's orders jumped 29% as demand for next-generation reactors remained strong. GE also recorded more than $ 22 billion in new orders this week at the Farnborough Air Show in England in 1965 [9]

. At GE Capital, the company's financial services division fell 20% to $ 207 million, while revenues declined 1% to $ 2.4 billion.

GE continues to reduce the size and risk of unity. The company has been a source of negative surprises for investors and Flannery is looking for options to neutralize or leave parties or all business, say people who know the subject well.

Write to Thomas Gryta at [email protected]