General Electric Co.
warned that its business would be pressured by supply chain disruptions this year after reporting strong quarterly growth for its jet engine unit as commercial air traffic recovers from a pandemic-driven decline.
The Boston conglomerate said Tuesday that its year-on-year results were coming to the low end of predictions it issued in January. The manufacturer continues to experience pressure from supply chain disruptions and rising raw material and freight costs and the impact of Russia’s invasion of Ukraine.
“As we continue to work through inflation and other shifting pressures, we are currently moving towards the low end of the range,” said CEO Larry Culp.
For 2022, GE had forecast high single-digit revenue growth, earnings of $ 2.80 to $ 3.50 per share and a free cash flow of $ 5.5 billion to $ 6.5 billion
GE stock fell 4% in early trading Tuesday morning.
GE, which has slimmed down and streamlined its activities under Mr. Culp, plans to split into three separate public companies over the next two years, with its health department expected to be spun off in early 2023.
The results for the first quarter showed how the various parts of the conglomerate are doing in the current climate, where a recovery in air travel is increasing one unit and a decline in the demand for renewable energy is dragging down another.
The revenue of the aviation division, which manufactures and services jet engines, increased 12% to $ 5.6 billion in the first quarter, while the segment’s profit increased to $ 908 million. GE said it expects demand in the division to remain strong. It faces uncertainty in China due to recent Covid-19 shutdowns and supply chain disruptions, but expects revenue growth of at least 20% for the year.
In the healthcare division, which manufactures CT scanners, MRI machines and other hospital equipment, revenue rose 1% to $ 4.4 billion, but the segment’s profit fell 23% to $ 538 million as supply chains continue to hit the business.
Revenue in the power division, which manufactures and services turbines for gas-fired power plants, fell 11% to $ 3.5 billion in the first quarter.
The renewable division, which makes wind turbines, had a sales decline of 12% and an operating loss of $ 434 million. GE said its U.S. onshore wind turbine business was hit by political uncertainty over tax deductions and deferred customer investment, while the entire division was hit by rising materials and logistics prices.
Overall, GE reported a loss of $ 1.1 billion in the first quarter attributable to ordinary shareholders, which is less than the year before loss of $ 2.9 billion. Excluding goods, GE said its adjusted earnings were 24 cents per share compared to Wall Street’s estimate of 18 cents per share. Revenue was $ 17.04 billion against $ 17.07 billion a year ago. Analysts had expected $ 16.85 billion, according to FactSet.
GE said it contributed $ 2 billion to reserves in its discontinued insurance business and said it expects additional contributions of $ 3.6 billion by 2024. In 2018, the company had to set aside $ 15 billion in additional reserves for long-term care insurance after changed its assumptions for the portfolio.
The first quarter also included $ 200 million in fees, mainly from impairments related to Russia’s invasion of Ukraine in its aviation and power divisions. GE also recorded $ 200 million in fees from a $ 2.2 billion portfolio of Polish mortgages.
The company reported free cash flow of negative $ 880 million for the first quarter.
The separation of GE’s large companies will begin with the health department early next year. The electricity and renewable energy business will be combined and form a separate company in early 2024. Existing GE shareholders will receive new shares in the two companies after they are separated.
Since taking over as the first outsider to lead GE in 2018, Mr. Culp sold entire divisions, strengthened its balance sheet, streamlined manufacturing practices and decentralized company management. Instead of a large corporate umbrella overseeing the divisions, Mr. Culp those responsible for their own investments and costs.
In November, GE sold its more than $ 30 billion jet leasing business, enabling it to pay down more debt and fold the rest of GE Capital, its once massive financial services business, into its corporate operations.
Write to Thomas Gryta at email@example.com
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