Sun, Oct 22, 2017 - Page 16 News List

GE’s new CEO vows to improve corporate results

‘PLATITUDES’:JPMorgan Chase said the industrial conglomerate was suffering from deep-seated structural problems that could not be fixed by improving numbers

AFP, NEW YORK

Newly-installed General Electric Co (GE) chief executive John Flannery on Friday vowed to do whatever it takes to turn around the industrial giant after weak quarterly results initially sent shares plunging.

“It’s clear we need to make some major changes,” Flannery said. “Our results are unacceptable to say the least.”

Flannery, who replaced Jeff Immelt over the summer, faced tough questions from analysts after GE reported lower third-quarter earnings and cut its full-year forecast due to continued weakness in the power, and oil and gas businesses.

Flannery has vowed to present a comprehensive plan at a Nov. 13 investor day to rouse growth at the 125-year-old company.

He described next year as a “reset year.”

The market’s reaction suggested investors were open to Flannery.

After falling by more than 7 percent in pre-market trading after the report’s release, GE shares finished up 1.1 percent at US$23.83.

Net profit for the quarter ending Sept. 30 was US$1.8 billion, down 9.7 percent from the same period last year. Revenues were US$33.5 billion, up 14.4 percent, reflecting the effects of the Baker Hughes oil services acquisition.

The company slashed its full-year operating profit forecast to US$1.05 to US$1.10 per share, from US$1.60 to US$1.70 in a July forecast.

Revenue and profit tumbled in the power division, where the market for gas turbines remained weak and the company wrote down US$1.2 billion of assets.

Chief financial officer Jeff Bornstein, who is to step down at the end of the month, said GE had misread the power market, overinvesting in capacity that did not sell and not moving quickly enough to cut costs.

“We have a tough 2018 in front of us, but feel optimistic about the business beyond that,” Bornstein said of power.

Oil and gas was another burden, as GE booked US$267 million in once-off restructuring expenses amid sluggish investment from exploration and production companies. Better-performing divisions included aviation, healthcare and renewable energy.

“Operationally, this result was much worse than we expected,” a note from Goldman Sachs Group Inc said.

However, JPMorgan Chase & Co alluded the results to deep-seated structural problems.

“Anyone who thinks this story is about high-level platitudes, and a simple slide deck with pictures and inaccurate numbers simply is not doing any work,” JPMorgan said.

GE has come under fire for profligate spending under Immelt.

The Wall Street Journal on Thursday reported that Immelt regularly took two corporate jets for travel in case one broke down.

GE last month said that it plans to sell its corporate jet fleet.

The company plans to pare back its global research efforts and might shut down research centers in Shanghai, Munich and Rio de Janeiro, the Wall Street Journal said.

GE on Friday said that the company would divest US$20 billion in assets in the next two years.

Flannery has already announced a number of executive appointments and said he will pursue “sweeping” change in the period ahead.

The company has added Ed Garden, chief investment officer at activist hedge fund Trian, to its board. Flannery said that further board changes could be in store, noting that it is big at 18 people.

“I’d put it in the bucket of all things being examined right now,” he said.

Flannery has signaled a strong commitment to maintaining GE’s dividend, a priority for investors.

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