General Electric Co. recorded about $ 2 billion in quarterly losses when revenue fell 24% as a result of a sharp drop in the jet business that was woven by the coronavirus pandemic.
The aviation business, which was the engine of profit for GE, declined to losses in the June quarter as both revenue and orders fell. The unit manufactures engines for Boeing Co. aircraft. and Airbus SE, but it had to cut production and jobs as airlines delayed orders. On Wednesday, Boeing said it would cut further production of commercial aircraft.
GE said it slept through less cash in the June quarter than previously warned. The company said it was adjusting the negative cash flow from industrial operations of $ 2.1billion. US, compared with the forecast minus 3.5 billion to 4.5 billion dollars. USA in May. Analysts expected a negative cash flow of $ 3.29 billion, according to FactSet.
“We are working through the still complex environment of Covid-19,” said CEO Larry Culp, adding that he still expects a long resumption of commercial aviation business. “However, based on what we see today and the actions we have taken, a consistent improvement in earnings and cash in the second half of the year is achievable.”
GE also said it expects a return in positive cash flow in 2021. This measure is closely monitored by investors when problems with cash generation have forced the company to reduce its dividend and sell business units. In May, it sold its age-old GE Lighting unit, the latest consumer service.
In an interview, Mr. Kalp said there was an improvement over the months of the quarter, citing an increase in aircraft departures and increased use of GE health scanning equipment. According to him, the company’s production facilities and service groups have returned to “almost full capacity” since the beginning of the quarter. But uncertainty about the wider economy and pandemic remains.
“Obviously, in terms of data, trends and how governments and the public will react when we fall, this is the main card for most every company,” he said.
The conglomerate is renewing itself under Mr Kalp, focusing on debt reduction and generating more cash, but has been hit hard by the coronavirus crisis, which has given it its full-year financial outlook in April. GE plans to cut costs by more than $ 2 billion in 2020, and Mr. Kalp does not rule out additional job losses.
“We want to be realistic that this is an incredibly difficult environment,” he said. “It was true in the second quarter, and it will be true as we move forward, so we will continue to look for opportunities to cut costs and save money.”
On Wednesday, GE said it plans to sell the remaining stake in oil and gas company Baker Hughes within three years. GE said it cut debt by $ 9.1 billion this year and received $ 41 billion in cash in late June.
Profits and sales fell from a year ago in GE’s main operating divisions. Revenue fell 44% in the aviation division, 3% in renewable energy and 11% in its energy segment, which makes turbines for power plants. All three reflected operating losses. Revenue fell 21% in the healthcare division, which manufactures hospital equipment and was the only manufacturing unit to generate operating profit.
Overall, GE reported a net loss attributable to ordinary shareholders of $ 2.18 billion, compared with a loss of $ 61 million a year ago. Revenue was $ 17.75 billion. Last year’s results include GE’s biopharmaceutical business, which it sold earlier this year, and its former controlling stake in Baker Hughes.
GE held more than $ 2.3 billion in the last quarter, writing off the value of several assets, including the industrial 3-D printing business, its GE Capital lease business and some long-term service contracts. The costs were partially offset by an increase in investment in its share of Baker Hughes.
Excluding positions, GE reported an adjusted loss of 15 kopecks per share, compared to Wall Street’s estimate of a 10 percent loss.
The aviation business has been GE’s largest and most profitable in recent years, benefiting from a booming aerospace market and investment, including the launch of GE’s state-of-the-art engine that delivers MAX MAX jet power. But with ground-based MAX and airlines canceling flights, GE said quarterly orders for new equipment fell 41 percent and services fell 67 percent from a year ago.
American Airlines Group Inc. and Southwest Airlines Co. said this month that they are hardening expectations of a resumption of flights as the pandemic grows in parts of the United States.
GE, which started the year with about 205,000 employees, has already announced plans to cut a quarter of its aviation division, which had 52,000 employees. The company said it had cut 5,400 aviation workers.
GE shares have changed slightly in the pre-sale sector – up to 11 kopecks to $ 7.01. Since the beginning of the year, shares have fallen by about 40%. Shares failed in 2017 and 2018 after GE discovered deep problems in the power unit and capital, which forced it to reduce dividends and sell the business. GE hired Mr. Kalp as CEO in October 2018, and he succeeded in streamlining operations prior to the pandemic attack.
Write to Thomas Grita at email@example.com