GE Posts Lower Sales, Loss on Restructuring Moves -- 2nd Update

By Thomas Gryta 

General Electric Co. reported lower revenue and a loss in its first quarter as the company's jet-engine business and divestitures weighed on its latest financial results.

GE's revenue fell 12% to $17.1 billion, reflecting a 28% decline in its aviation unit and a 9% drop in its healthcare unit after selling off part of the business. The company had a quarterly net loss of $2.8 billion, compared with a profit of $6.2 billion a year ago. The results include a $2.9 billion loss from the planned sale of GE Capital's jet-leasing business.

The industrial company said excluding discontinued operations and other one-time charges its industrial free cash flow was negative $845 million in the first quarter, an improvement from burning $2.2 billion in the year-ago period. On that basis, it had adjusted earnings of 3 cents a share, compared with analysts' forecasts for a 1-cent profit.

"We see the beginnings of this recovery, both from a public-health perspective and from an economic view," Chief Executive Larry Culp said in an interview Tuesday. "We're seeing continued progress especially on [profit] margins and cash flow and we believe these improvements are sustainable.

GE backed its previous 2021 financial projections, including cash flow of $2.5 billion to $4.5 billion from the industrial operations, along with adjusted earnings of 15 cents to 25 cents a share.

The first quarter is typically a slower quarter for GE, which traditionally sees most of its business closer to year-end. GE reported $4.4 billion in fourth-quarter cash flow, citing a flurry of orders that closed in December.

The company has been slashing costs in its aviation unit and streamlining its power business, while shrinking its debt load through asset sales including the deal to shed its jet-leasing business last month.

GE shares are up 84% in the past six months, closing Monday at $13.57. The S&P 500 index is up about 21% in the same period. The stock was down 47 cents, or 3.5%, to $13.10 at midday Tuesday.

The coronavirus pandemic continues to pressure GE's jet-engine business, its largest division, but the overall results showed progress in the yearslong turnaround of the company that also makes healthcare machines and power-generating equipment.

Like many companies, GE said it is seeing costs rise for inputs like semiconductors, resins and metals. For short-term situations, GE said it is able to increase prices, sometimes through surcharges. On larger projects, like jet engines or giant power turbines, there are often inflation-based increases built into the original sales agreement.

"It's a myriad of things that you do inside businesses like these to make sure you're managing price while you manage cost as well," said Mr. Culp. The company is "looking with fresh eyes" at its current practices around contracts and pricing, he said, as it looks at a more inflationary environment than has been seen in decades.

"We're trying to make sure that we've got that tuned up and ready for the next 10 years and not assume that what we had in place the last 10 is necessarily fit for purpose," he said.

GE Aviation's military business has had some supply-chain challenges causing delayed deliveries for a few quarters, he said. There is no single issue but GE is working on its own operations and working with suppliers to solve the problems. "It's one reason that the aviation revenue numbers are softer than they would otherwise be," Mr. Culp said.

The aviation division's revenue fell 28% to $5 billion. GE has previously said it expects the aviation market to begin recovering in the second half with 2021 revenue in the division flat or higher from 2020 levels.

Airline executives have different views on how quickly pent-up demand for travel could return. Some are gearing up for what they hope will be a surge in summer vacations. U.S. airlines have also resumed flying Boeing Co.'s 737 MAX jets, whose prolonged grounding hurt a GE joint venture that supplies the plane's engines.

Revenue in the healthcare division, which makes CT scanners, MRI machines and other hospital equipment, fell 9% to $4.3 billion. The company said revenue rose 7% in the unit excluding the sale of its biopharma operations in early 2020. GE said demand for ultrasound machines was strong and some elective procedures had returned to pre-pandemic levels.

The aviation and healthcare units generated operating profits in the quarter while GE booked losses from its power and renewable energy units as well as the shrinking GE Capital. Revenue fell 3% in the power unit, which makes turbines for power plants, to $3.9 billion, while revenue in the renewable energy unit, which mostly makes wind turbines, rose 2% to $3.2 billion.

Write to Thomas Gryta at [e-mail]

(END) Dow Jones Newswires

April 27, 2021 12:16 ET (16:16 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.