GE profitable again in Q1; oil earnings fallAFP
New York (AFP) -
Higher power and aviation earnings helped General Electric return to profitability in the first quarter as it announced plans Friday for cost cuts this year and next.
But the industrial conglomerate, under pressure from activist Trian Partners to boost profitability, reported lower earnings in the oil and gas business and described conditions in the sector as still challenging despite higher oil prices.
"GE had a good quarter in a slow-growth and volatile environment," chief executive Jeff Immelt said on a conference call with analysts, adding that he sees global growth "accelerating" and the US continuing to improve.
Immelt said GE would cut $1 billion in costs in 2017 and another $1 billion in 2018. The longtime GE chief is being prodded by Trian's Nathan Peltz to boost returns, sparking speculation Immelt could soon retire.
GE reported $619 million in profits in the three months ending March 31, up from a $61 million loss in the year-ago period when it was hit by one-time costs linked to asset sales.
Revenues dipped 0.7 percent to $27.7 billion.
Operating profits growth was strongest in power, aviation and renewable energy.
Executives also touted a large electricity deal in Iraq and a soon-to-be-announced power service deal in the Middle East that chief financial officer Jeff Bornstein described as "a really phenomenal transaction."
But oil and gas remained a weak point, with operating profits falling 33 percent to $207 million, an indication that the market for oilfield services remains pressured after a two-year slump in oil prices that has abated only in recent months.
GE said it notched the strongest oil and gas orders in 10 quarters, yet producers remain skittish about approving significant new investment.
"The timing of the recovery will vary by segment, and a large degree of uncertainty remains," Bornstein said. "Crude inventory remains at a five-year high and markets are closely watching."
Immelt said a planned combination of GE Oil & Gas with oil services company Baker Hughes remains on track and is expected to close by midyear.
Shares of GE dropped 1.5 percent to $29.81 in mid-morning trade.