Abu Dhabi, UAESunday 26 May 2019

GE improves cash flow as Immelt prepares to depart

Company says operating cash flow rose by $1.5 billion during the second quarter

GE has managed to boost cash returns during its second quarter trading period Richard Drew / AP Photo
GE has managed to boost cash returns during its second quarter trading period Richard Drew / AP Photo

General Electric Co. shored up its cash performance as Jeffrey Immelt tackled one of investors’ most pointed concerns in his final days as chief executive officer.

Industrial operating cash flow rose to $1.5 billion in the second quarter, GE said in a statement on Friday as it reported earnings. Immelt had promised the metric would rebound after a surprise plunge during the first three months of the year rattled investors in the maker of jet engines, gas turbines and medical scanners.

Cash flow was “significantly better” than the equivalent figure in the first quarter, Immelt said in the release. “We expect cash flow to continue to improve throughout the year.”

The results give the departing CEO a boost as he prepares to hand the reins to John Flannery. The Boston-based manufacturer, under pressure from activist investor Trian Fund Management, recently agreed to deepen cost cuts as it contends with feeble demand in some markets and persistently low oil prices.

GE rose less than 1 percent to $26.89 in New York before regular trading. The shares plunged 16 percent this year throughout Thursday, while the Standard & Poor’s 500 Index climbed 10 percent.

Flannery, a GE veteran, has said he will make cash flow a focus when he takes the helm on Aug. 1. GE set off alarm bells after reporting negative $1.6 billion in industrial operating cash flows in the first quarter, as working capital increased.

That was about $1 billion worse than the company had anticipated. Second-quarter adjusted earnings fell to 28 cents a share.

That exceeded the 25 cent average of analysts’ estimates compiled by Bloomberg. Sales dropped 12 percent to $29.6 billion, compared with $29.2 billion expected by analysts.

At GE Power, the world’s largest maker of gas turbines, revenue climbed 5 percent. Sales were little changed at GE

Aviation and slid 3 percent in the oil and gas unit, which has struggled amid the plunge and sluggish recovery of crude prices.

GE this month closed a deal to combine the division with Baker Hughes, a move to broaden product offerings and help the companies capitalize on an eventual rebound. GE owns 62.5 percent of the new entity.

Immelt has been reshaping the portfolio and tightening operations amid pressure from Trian. Nelson Peltz’s firm took a stake in GE in 2015 after Immelt unveiled a plan to shed financial businesses and tilt the company toward equipment manufacturing.

Operating earnings in 2017 will be $1.60 to $1.70, GE said, reaffirming an earlier forecast.

* Bloomberg

Updated: July 21, 2017 03:22 PM