General Electric Co. reported a quarterly loss of approximately $ 2 billion, as revenue fell 24%, hurt by a sharp decline in a jet engine business that has been hampered by the coronavirus pandemic.
The aviation business, which was once a profit engine for GE, lost in the June quarter as both revenue and orders plummeted. The unit produces engines for Boeing Co. and Airbus SE aircraft, but has had to cut production and employment as airlines delay orders. On Wednesday, Boeing said it would cut production of commercial aircraft.
GE reported consuming less cash in the June quarter than previously warned. The company reported an adjusted negative cash flow from industrial operations of $ 2.1 billion, compared to its projection of $ 3.5 billion to $ 4.5 billion negative in May. Analysts had expected a negative cash flow of $ 3.29 billion, according to FactSet.
“We are working in a still difficult Covid-19 environment,” CEO Larry Culp said, adding that he still expected a prolonged recovery for the commercial aviation business. “Still, based on what we see today and the actions we’ve taken, a sequential improvement in earnings and cash can be achieved in the second half of the year.”
GE also said it expects a positive return to cash flow in 2021. The move is closely watched by investors after problems with generating cash forced the company to cut its dividends and sell business units. In May, it sold its century-old GE Lighting unit, its latest link to consumers.
In an interview, Mr. Culp said there was an improvement during the quarter months, citing a rebound in airplane departures and increased use of GE’s healthcare scanning equipment. He said the company’s manufacturing facilities and service groups have returned to “almost full capacity” since the beginning of the quarter. But uncertainty about the overall economy and the pandemic persists.
“Covid, in terms of data, trends and how governments and the public will react as we get closer to fall, is the wild card for most companies,” he said.
The conglomerate has been modernized under the leadership of Mr. Culp with a focus on reducing debt and generating more cash, but it has been greatly affected by the coronavirus crisis, which led it to take out its year-round financial perspective in April. GE is on track to cut more than $ 2 billion in costs in 2020, and Culp would not rule out additional job losses.
“We want to be realistic that this is an incredibly challenging environment,” he said. “That was true in the second quarter and will be as we move forward, so we will continue to look for opportunities to cut costs and preserve cash.”
On Wednesday, GE said it planned to sell its remaining stake in the oil and gas company Baker Hughes for three years. GE said it cut its debt by $ 9.1 billion this year and had $ 41 billion in cash at the end of June.
Profits and sales decreased for a year in GE’s main operating units. Revenue fell 44% in the aviation unit, 3% in renewable energy and 11% in its energy segment, which makes turbines for power plants. All three recorded operating losses. Revenue fell 21% at its health care unit, which makes hospital equipment and was the only industrial unit to generate operating profit.
Overall, GE posted a net loss attributable to common shareholders of $ 2.18 billion, compared to 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 reserved more than $ 2.3 billion in charges in the last quarter, noting the value of various assets, including its industrial 3-D printing business, its GE Capital jet leasing business, and some long-term service contracts. The charges were partially offset by investment gains on his stake in Baker Hughes.
Excluding items, GE reported an adjusted loss of 15 cents per share, compared to Wall Street’s estimate of a loss of 10 cents per share.
The aviation business was GE’s largest and most profitable in recent years, benefiting from a booming aerospace market and investments, including the launch of GE’s most advanced engine to power Boeing Co.’s MAX jet. But With the MAX on the ground and airlines canceling flights, GE said quarterly orders for new equipment fell 41% and services fell 67% from a year earlier.
American Airlines Group Inc. and Southwest Airlines Co. said this month that they were moderating expectations for a recovery in air travel, as the pandemic escalates in some parts of the U.S.
GE, which started the year with about 205,000 workers, has already announced plans to cut a quarter of its aviation unit, which had 52,000 employees. The company said it cut 5,400 aviation workers in the quarter.
GE shares changed little in premarket trading on Wednesday, rising 11 cents to $ 7.01. Since the beginning of the year, shares had fallen about 40%. The stock fell in 2017 and 2018 after GE revealed deep problems in its power unit and capital arm that forced it to cut its dividends and sell its businesses. GE hired Mr. Culp as CEO in October 2018 and had made progress in streamlining operations before the pandemic.
Write Thomas Gryta at [email protected]
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