GE Cuts Profit Targets Amid Losses in Renewable Energy Business | Whuff News


General Electric Co. reported falling profits in its latest quarter and outlined plans to cut costs in its renewable energy business where problems offset strong gains in the company’s aerospace division.

GE GE 0.46%

said it is still in the process of splitting itself into three companies, starting with the spin-off of its healthcare business in January. In the quarter, losses in its energy business weighed on its overall results and caused the company to lower its revenue target for the year.

GE lowered its forecast for adjusted earnings for 2022, to a range between $2.40 and $2.80 a share, from $2.80 to $3.50 a share estimated at the beginning of the year. In July, the company had warned that it expected results to come in at the low end of the first range. Analysts were looking for earnings of $2.66 in 2022 before the update, according to FactSet.

The conglomerate maintained its forecast for annual revenue growth, but said its free cash flow, a closely watched metric of how much money its businesses are making, would come in at the low end of its previous forecast – which has been reduced since the start of the year. .

GE said it is launching a corporate restructuring program to deliver $450 million in annual savings and a restructuring program in its Vernova energy business, primarily in its renewable energy operations, to save another $500 million a year. The unit manufactures electric motors for power plants and wind turbines. It expects Vernova’s business to post a combined loss of about $2 billion by 2022, tied to inflation, low demand and high warranty pressure.

The renewables sector, which recently laid off workers, is expected to be profitable in 2024. The company is improving its productivity in the industry to reduce costs and be more selective about the projects it accepts, Chief Executive Officer Larry Culp said Tuesday. The growth of the offshore wind sector is expected to be profitable by the middle of the decade, he said.

GE said the measures would result in a restructuring charge of up to $1.3 billion. It did not say how many jobs would be affected by the moves. Mr. Culp has been restructuring the conglomerate, shrinking headquarters and restructuring operations. Last week, the company said it was looking to sell its popular management training center.

GE shares fell about 1.6% in early trading to $72.21. The stock is down about 24% so far this year, compared to a 20% drop in the S&P 500 Index.

Overall, GE reported a second-quarter loss of $55 million, worsening from a year-earlier profit of $584 million. Regardless, GE said its adjusted earnings were 35 cents a share, below Wall Street’s 49 cents estimate, and 53 cents in the first quarter of the year. Revenue was $19.08 billion compared to $18.57 billion last year. Analysts had estimated $18.77 billion, according to S&P Global Market Intelligence.

Quarterly revenue rose 24% in the aerospace business, which makes and services jet engines, and rose 6% in the healthcare business, which sells medical equipment. Revenue was down 15% from last year in renewables and 12% across the energy business.

The company said it was able to raise prices in its aerospace division faster than its costs increased, and it raised prices in its healthcare division. Prices have also improved for its renewable unit, but only enough to partially offset low capacity and other challenges.

GE reported raising prices across all of its parts in the second quarter, and said in July it expected to continue doing so this year amid rising costs. GE said earlier this year that it expects rising costs to exceed its ability to raise prices, but that the gap will begin to narrow in the second half, thanks largely to the efforts of the company and its suppliers.

The company said Tuesday that it now expects free cash flow in 2022 to come in at about $4.5 billion. After the second quarter, GE cut its 2022 free cash flow forecast by about $1 billion, from the $5.5 billion to $6.5 billion it forecast in January.

Thomas Gryta contributed to this article.

Write to Theo Francis at theo.francis@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8



Source link