GE Q2 net profit jumps 13% to $3.5 bn
19 Jul 2014
US engineering and technology multinational General Electric has reported a 13-per cent increase in net income for the second quarter (April-June 2014) at $3.5 billion, on the back of strong performance of its aviation and oil and gas divisions.
GE, the largest industrial company in the United States, said revenue from its industrial businesses, with products including jet engines, power generators, oil field machinery and medical imaging equipment, rose 7 per cent.
On the other hand, GE said revenue at its sizable finance unit, GE Capital, declined 6 per cent year-on-year. That, GE said, was expected as the company has been steadily reducing its dependence on GE Capital since the financial crisis of 2008.
Second-quarter net earnings attributable to GE (including the effects of discontinued operations) were $3.5 billion ($0.35 per share) up 13 per cent compared with $3.1 billion ($0.30 per share) in the second quarter of 2013.
Second-quarter operating earnings were $3.9 billion, up 7 per cent from second-quarter 2013, and operating EPS was $0.39, up 8 per cent. GAAP earnings from continuing operations (attributable to GE) were $3.6 billion, up 10 per cent, or $0.35 per share, up 13 per cent from the second quarter of 2013.
Second-quarter revenues increased 3 per cent to $36.2 billion. Industrial sales of $26.2 billion increased 7 per cent compared to the second quarter of 2013. GECC revenues of $10.2 billion decreased 6 per cent from last year.
The company said orders, especially those in developing countries, were strong and the global economic environment continues to be positive.
GE also said its previously announced plan to spin off its credit card business with an initial public offering is targeted for late July. GE said it plans to sell 15 per cent of the company, to be called Synchrony Financial, and raise $3.1 billion in the process.
''GE had a good performance in the quarter and in the first half of 2014, with double-digit industrial segment profit growth, 30 basis points of margin expansion, and nearly $6 billion returned to shareholders,'' said GE Chairman and CEO Jeff Immelt. ''The environment continues to be generally positive.''
GE's backlog of equipment and services at the end of the quarter was $246 billion, up $23 billion over the year-ago period with increases in every segment.
This week, GE and CFM (a 50:50 joint venture between GE and Snecma) also announced Farnborough Airshow wins of more than $36 billion at list price, including $13 billion with Emirates, $3.3 billion with easyJet, and $2.6 billion with American Airlines.
During the quarter, GE's offer for Alstom's Power and Grid businesses was accepted by the Alstom board and approved by the French government. It is proceeding to works council consultations and is subject to Alstom shareholder approval and customary regulatory approvals.
The deal is targeted to close in 2015. GE expects Alstom to be accretive to earnings in 2015, and add $0.06 to $0.09 per share in 2016. This will accelerate the Company's portfolio strategy to achieve 75 per cent of earnings from its Industrial business by 2016.
GE Capital continued its strategy to decrease the size of its non-core portfolio. ENI (excluding cash and equivalents) was at $371 billion at quarter-end, down $2.4 billion from last quarter and down 5 per cent from the year-ago period.
General Electric Capital Corporation's (GECC) estimated Tier 1 common ratio (Basel 1) rose 51 basis points from the year-ago period to 11.7 per cent, and net interest margin was strong at 5 per cent.
Through the first half of the year, GECC has returned $1.4 billion in dividends to the parent. GECC recorded tax benefits in the quarter to reflect a lower expected tax rate for 2014, primarily driven by its planned tax-efficient disposition of the consumer bank in the Nordics.
GE also announced that it is targeting the IPO of its North American Retail Finance business (Synchrony Financial) for the end of July, the first step in a planned, staged exit from that business.
GE said it is on track to meet its goal of $1 billion or more in structural cost-out for the year, with $382 million of cost-out through the first half of 2014.
Cash from GE operating activities (CFOA) was $3.4 billion year-to-date. GE ended the quarter with $87 billion of consolidated cash and cash equivalents. The company has returned $5.9 billion to shareowners year-to-date, including $4.4 billion of dividends and $1.5 billion of stock buyback.
''Our total-year framework is on track and we are committed to delivering for our investors. Investments in R&D are paying off in Industrial segment growth and the share gains we see across the board are reinforced by the Farnborough Airshow this week. GE Capital is returning cash to the parent while becoming more focused on its core business. Our balanced approach to capital allocation is delivering cash to shareowners. With the Retail Finance split-off and Alstom acquisition, we are boldly repositioning the Company for the future,'' Immelt concluded.
