Turn out the lights?

Gen­eral Elec­tric re­thinks its fu­ture af­ter pulling back on profit ex­pec­ta­tions

The Telegram (St. John’s) - - BUSINESS -

Gen­eral Elec­tric slashed its div­i­dend in half and will at­tempt to vastly nar­row its fo­cus to three key sec­tors - avi­a­tion, health care and energy as the con­glom­er­ate with early ties to Thomas Edi­son con­sid­ers shed­ding even its his­toric light­ing busi­ness.

The com­pany also pulled back on profit ex­pec­ta­tions Mon­day and shares slumped 5 per cent in mid­day trad­ing, pulling he en­tire in­dus­trial sec­tor lower as well.

New Chair­man and CEO John Flannery said the com­pany is weigh­ing the fu­ture of its trans­porta­tion, in­dus­trial, and light­ing busi­nesses so that it can fo­cus more in­tently on its most prof­itable di­vi­sions.

GE’S quar­terly div­i­dend is be­ing cut to 12 cents to bring pay­outs to share­hold­ers closer in line with the amount of money that the com­pany is bring­ing in. Ac­cord­ing to S&P Global, GE will save $4 bil­lion a year.

Flannery, speak­ing at GE’S in­vestor meet­ing in New York, said 2018 will be a “re­set” year, and pro­jected a profit of be­tween $1 and $1.07 a share. That’s well be­low the $1.15 a share an­a­lysts ex­pected, ac­cord­ing to Fact­set. GE also fore­cast weaker cash flows than an­a­lysts had pro­jected.

Last month Flannery said that GE would shed busi­ness units worth more than $20 bil­lion over the next year or two. It has been par­ing busi­nesses for well over a decade now. He has been tasked with re­viv­ing growth and says the cost­cut­ting moves are in­tended to make GE sim­pler and stronger.

Shares of GE are down 38 per cent this year and trad­ing at five-year lows.

Gen­eral Elec­tric also said it may dis­tance it­self from Baker Hughes, the oil and gas gi­ant of which it bought a ma­jor­ity stake ear­lier this year.

Flannery said the in­te­gra­tion of Baker Hughes into GE’S busi­ness is go­ing well, but the com­pany seeks to lessen its ex­po­sure to volatile energy prices.

“The first 100 days maybe didn’t go ex­actly as I was ex­pect­ing,” said Flannery, who be­came CEO in Au­gust.

Baker Hughes fell 2.2 per cent in early trad­ing.

Af­ter a weak third-quar­ter, Flannery said last month that GE was plan­ning ma­jor cost cuts across the board and that it would exit some busi­nesses. The com­pany has al­ready sur­passed its goal of cut­ting $1 bil­lion in in­dus­trial costs this year, and plans more than $2 bil­lion in cuts next year..

That is dou­ble the orig­i­nal tar­get, to go with at least $20 bil­lion in di­vest­ments over the next year or two, Flannery said.

The com­pany’s board is shrink­ing as well, Flannery said, from 18 mem­bers, to 12.

There will be three new di­rec­tors with relevant industry ex­pe­ri­ence, an­nual elec­tions for board mem­bers, and a term limit of 15 years. Board changes will be in ef­fect by April.

Last month GE said two of its vice chairs will leave at the end of the year as the com­pany con­tin­ued to an­nounce changes at the top af­ter the end of Jeffrey Im­melt’s 16-year run. The com­pany also re­placed its chief fi­nan­cial of­fi­cer.

In terms of the amount paid to in­vestors, the div­i­dend cut is one of the largest in U.S. cor­po­rate his­tory. S&P Global said the largest ever was also made by GE: the com­pany axed $8.9 bil­lion in an­nual spend­ing in early 2009 when it cut its div­i­dend in re­sponse to the global fi­nan­cial cri­sis.

That re­duced GE’S quar­terly pay­ments to 10 cents from 31 cents.


In this June 12 file photo, the Gen­eral Elec­tric logo ap­pears above a trad­ing post on the floor of the New York Stock Ex­change.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.