General Electric said it has seen “early signs” of success in turning round its troubled power generation unit as the US industrial conglomerate boosted its 2019 outlook even as it slumped to a loss in the second quarter.
The blue-chip company, which makes everything from MRI machines to jet engines, said on Wednesday that while there was still a “long way to go” in stabilising the power business, the situation was improving.
Orders rose 2 per cent in the second quarter on an organic basis that excludes currency fluctuations, acquisitions and divestments from the same three months in 2018 to $4.9bn. However, the division only eked out a profit of $117m, down 69 per cent from the previous year on an organic basis.
GE’S business making large gas turbines for power generation has been hit hard by the rise of renewable energy and the company has been working to turn it round. Larry Culp, who took over as chief executive last October, said the power division had made “meaningful improvements on fixed cost reduction and project execution” during the April to June quarter.
Progress in the power division, expectations for lower costs in a broad restructuring programme, as well as strength in GE’S healthcare division and lower interest costs left
the company confident enough to raise its 2019 outlook.
GE, which was founded in the early 1890s, now expects adjusted earnings per share, which exclude certain items, to be 55 cents to 65 cents, up 5 cents from an update in March. Wall Street analysts had been forecasting 2019 EPS of 59 cents, according to a Factset survey.
Organic revenue growth in the industrial segment, which includes GE’S non-financial businesses, is now expected to rise in the “midsingle digits”, from “low to mid single digits” previously.
Second-quarter revenues for GE as a whole were $28.8bn, down 1 per cent from the previous year. Net loss attributable to common shareholders was $61m, down from a profit of $615m during the same quarter in 2018. The group’s loss per diluted share was 1 cent, from a profit of 7 cents in the previous period.
GE’S shares rallied 5 per cent in pre-market trading in New York to $11.05. They have bounced back significantly since tumbling below $7 late last year, but were still down 18 per cent for the past 12 months as of Tuesday’s close.
“We made steady progress on our strategic priorities in the second quarter. Our top-line growth was solid, and power made meaningful improvements on fixed cost reduction and project execution,” said Mr Culp, who added that he was “encouraged” by the progress so far in 2019.
