Oct 25 (Reuters) – General Electric Co ( GE.N ) on Tuesday revised up its full-year profit forecast after reporting a drop in third-quarter revenue, primarily due to higher warranty and related reserves in its renewable energy business.
The company, however, reported much higher than expected free cash flow. Its quarterly earnings also beat Wall Street estimates.
GE shares were down about 1.8% at $72.02 in midday trading.
The company is in the process of splitting into three companies, facing challenges in its offshore wind business. The unit, which is the largest of GE’s renewables businesses, has been grappling with higher raw material costs due to rising prices and supply pressures.
In the United States, which has been GE’s most profitable offshore wind market, policy uncertainty following the expiration of tax credits for renewable electricity production last year has hurt demand, contributing to a 15% year-over-year decline in renewable energy revenue in September. a quarter.
Chief Executive Larry Culp said offshore wind is a “battleground” for the company as it aims to make its renewables business profitable by 2024.
Although the restoration of tax credits for wind projects in the United States is expected to boost demand in the medium to long term, GE expects a loss of renewable energy of about 2 billion dollars this year.
“In the short term, consumers continue to postpone future investments,” Chief Financial Officer Carolina Dybeck Happe said on the earnings call.
The company will reduce the global footprint of its offshore wind unit by approximately 20% as part of a restructuring and resizing plan. In an interview with Reuters, Culp said the cuts would take place over the next 12 months.
The restructuring will also affect jobs at the renewable energy unit’s headquarters, he said.
As it prepares to split into three independent businesses, GE is looking to cut corporate costs. The company said the restructuring and downsizing of the renewable energy business will cost $1.3 billion and generate $950 million in annual savings.
GE said it is seeing “early signs” of improvement in supply chain problems and is getting better at passing on added costs to customers.
Still, supply chain and major pressures cut 4 percent of its total revenue in the September quarter.
GE reiterated that demand in its aviation unit is expected to remain strong, leading to revenue growth of more than 20%. The company reported a double-digit increase in jet engine deliveries since the second quarter.
The Boston industrial conglomerate now expects adjusted earnings in 2022 in the range of $2.40 to $2.80 per share, compared to $2.80 to $3.50 previously estimated.
It reported adjusted earnings of 35 cents a share, down from earnings of 53 cents a share last year. Excluding the $500 million warrant and related reserves in its renewable energy business, quarterly earnings would have been 75 cents a share.
Free cash flow in the September quarter came in at $1.19 billion, well above its previous estimate.
Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Edited by Saumyadeb Chakrabarty, Sriraj Kalluvila, Nick Zieminski and Josie Kao
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