BOSTON — General Electric said Tuesday it ended a difficult 2020 with improved cash flow and a better outlook for 2021, albeit with 20,000 fewer employees and facing an unknown impact from COVID this year.
The fourth-quarter and year-end report was received favorably, despite GE missing its projected profit, and the company’s stock price soared as much as 11.3% early Tuesday in heavy trading. It closed at $11.29, only 2.7% higher than Monday’s close.
“It’s hard to think of a tougher year than 2020,” GE CEO H. Lawrence Culp Jr. began, during a conference call with financial analysts Tuesday. “However, our team performed and the fourth quarter marked a strong cash flow finish to the year.”
Orders were down 3% in the fourth quarter of 2020, he said, but that was a considerable improvement from the second and third quarters, which were rocked by the onslaught of the COVID pandemic.
The company began 2020 expecting strong performance from its Aviation and Healthcare segments and planning to execute turnarounds in Power and Renewables.
Instead, Aviation suffered hugely as civilian air travel worldwide slowed to a trickle. Healthcare was a strong generator of cash flow with elevated demand for COVID-related equipment and reduced demand for non-pandemic equipment — ventilator production capacity was quadrupled, for example. All three Power Portfolio businesses generated profit growth in the fourth quarter, for the first time in two years. And revenue was up for Renewables for the year, though the margin, while improved, was still negative.
Other details from the presentation:
- GE secured $72 billion in orders in 2020, down 20% from 2019; generated $79.6 billion in revenue, down 16%; and recorded earnings of 1 cent per share after adjustments, down 98%.
- CFO Carolina Dybeck Happe said GE ended 2020 with 11 percent fewer employees than it started with, a reduction of more than 20,000 people.
- She also said that GE decreased its pension deficit by $2.3 billion and won’t need to make contributions to the pension plan until 2024, under current assumptions.
- Culp said Power Portfolio will be restructuring as it exits the business of building new coal-fired steam power plants, and that will likely cost money.
- GE for the first time broke out its research and development costs separately in its earnings/loss statement, to provide a better picture of R&D trends as part of GE’s total investment in innovation. The R&D spending dropped from $3.12 billion in 2019 to $2.57 billion in 2020. The conglomerate’s central hub of R&D is GE Research, headquartered in Niskayuna. Each component business also does its own R&D, either alone or in concert with GE Research. A GE spokesman said 2020 was a strong year for GE Research; the reduction in spending was predominantly in the component businesses, and GE still was able to introduce a host of new innovations in 2020.