BOSTON — General Electric offered a guardedly upbeat update on its finances Wednesday, raising its full-year financial projections and delivering a second-quarter report sprinkled with caveats.
After making his introductions, the very first words in CEO H. Lawrence Culp Jr. said in the webcast presentation to industry analysts were a reminder of the financial troubles the company has had and the efforts it is making to recover: “Let me begin by reiterating that 2019 remains a reset year for GE.”
But he quickly went on to say that year-to-date performance is ahead of expectations in some areas, and that GE has raised its projected earnings per share by 5 cents. Projected restructuring costs were revised downward and projected industrial free cash flow outlook for the year was boosted by $1 billion, though it may still end up negative.
These changes are partly due to improvements and partly due to conservative planning, Culp said.
He said later: “I’m encouraged cautiously by what we’ve accomplished, but there’s much more to do.”
GE Power, historically the heart of the conglomerate and more recently a financial drag on it, is performing better than expected halfway through 2019 due to better project execution, orders and capital management, he added.
The power business, formerly headquartered in Schenectady, has been the subject of intensive cost cutting, workforce reductions and facility closures.
Also Tuesday, GE announced that Chief Financial Officer Jamie Miller would “transition” out of the position after nearly two years as CFO and 11 years as a GE executive. “With the stabilization beginning to take hold, this is the right time for a change,” Culp said.
Culp and Miller shared insight and details on various topics during the call, including:
- Priorities for the rest of the year include continued improvement at GE Power and GE Renewables, especially on projects, delivery, costs and service.
- Orders are up at Gas Power and costs are down as GE continues “rightsizing” the business.
- The government-ordered grounding of the Boeing 737 Max after two deadly crashes has cost GE $600 million so far this year and will cost $400 million per quarter as long as it continues. (The airliner uses jet engines that GE co-manufactures.)
- GE has reduced net workforce at Gas Power by 1,000 so far this year and had vacated nine offices and two warehouses; it is on track to reduce offices by more than 25% and warehouses by more than 33% by the end of 2020.
- Corporate-managed head count has dropped from about 26,000 at mid-2018 to about 12,000 now; more than two-thirds of the decrease was through internal transfers to GE’s component businesses, the rest through outsourcing, restructuring and attrition.
- Renewable Energy saw a surge in orders, led by its onshore wind turbine business, which bases its American region in Schenectady, but the revenue gain was offset by other factors; “In all, this can be and needs to be a better business than it is today,” Culp said.
- GE expects tariffs levied in the trade war to have a net impact of $400 million to $500 million this year, mostly in its Healthcare and Renewables business.
General Electric stock closed at $10.45 per share on Wednesday in heavier than average trading, down 0.67% from Tuesday. The stock went on a protracted skid from December 2016 to December 2018, losing 79% of its vale, but has since seen a significant rebound. At $10.45 a share, however, it is now worth less than a third of what it was worth in late 2016.