GE Grew Organic Revenue, Boosted Margins And Delivered Cash In 2019
GE said that it met or exceeded its total financial targets in 2019. The company reported strong 2019 fourth-quarter and year-end results, including organic revenue growth, margin expansion and positive cash flow.
GE reported a 4.6% increase in Industrial segment organic revenue* to $24.7 billion in the fourth quarter of 2019, and a 5.5% increase to $88.1 billion for the whole year. The company also expanded its adjusted Industrial profit margin* by 410 basis points to 11.3% in the quarter, and by 60 basis points to 10% for the whole year.
The company reported Industrial free cash flow* of $3.9 billion for the quarter and $2.3 billion for the year. Adjusted earnings per share* of $0.21 in the quarter were up 50% compared to the same period in 2018. For the whole year, the same metric stood at $0.65, up 14%, which is at the high end of its most recent outlook.
“The fourth quarter marked a strong close to the year for GE,” said H. Lawrence Culp Jr., GE chairman and CEO. “We met or exceeded our full-year financial targets and are on a positive trajectory for 2020. We’re proud of our progress in 2019, including decisive actions to reduce our leverage and strengthen our businesses. Our work continues, but GE’s committed team, exceptional technology, and global network make me more confident than ever that we can deliver.”
The company ended the quarter with a strong backlog of $405 billion, up 15% year-over-year. Some 80% of the backlog consisted of services, an important profitability driver that allows GE to build long-term ties with its customers.
GE also reported progress in important strategic priorities, such as reducing its debt ratio and improving its performance by rolling out the Lean system of management across its factories.
When it comes to debt, the company said it reduced net debt* by $7 billion, bringing its Industrial leverage ratio from 4.8x net debt* to EBITDA* in 2018 to 4.2x in 2019. GE used cash from Wabtec and Baker Hughes transactions to pay down debt, including a $5 billion debt tender. Earlier in 2019, GE also announced the sale of its BioPharma division to generate further cash for deleveraging as well as U.S. pension benefit changes to further reduce debt.
GE Capital also reduced its debt by $7 billion, bringing its leverage target from 5.7x debt to equity in 2018 to 3.9x in 2019. The unit completed asset reductions of approximately $12 billion, exceeding its 2019 target of $10 billion and its two-year target of $25 billion. GE Capital also closed the majority of the sale of the aircraft lender PK AirFinance.
The company’s operational results also reflect its push to deploy the Lean system throughout GE. Lean has allowed the company to establish common operating processes and metrics throughout the company, as well as standard operational, talent, strategy, and budget reviews. For example, using Lean, a GE Aviation plant in Batesville, Mississippi, was able to reduce losses by more than 60% so far, saving millions of dollars’ worth of waste this year.
Speaking of individual GE businesses, they continued to strengthen, starting with GE Power. The Porto de Sergipe plant in Brazil, for example, will be using three record-breaking GE 7HA.02 gas turbines installed for the first time in the country. “We are very proud of this milestone and to know that we are generating reliable power to the Brazilian people,” says Luciano Silva, a project director at GE Gas Power. The three turbines, together with a giant steam turbine and three heat recovery steam generators (HRSG), are capable of generating a whopping 1.5 GW, or around 15% of Brazil’s Northeast region’s power needs. In fact, Porto de Sergipe will be the largest combined-cycle, gas-fired power plant in South America.
At GE Renewable Energy, GE’s newest and most powerful offshore wind turbine, the Haliade-X, became the first wind turbine to produce 262 megawatt-hours of energy in 24 hours. That’s enough energy to power 30,000 households in Rotterdam, Holland, where it is located. GE Renewable Energy completed the turbine in the fall and signed an agreement to sell the electricity generated by the prototype to the sustainable energy company Eneco, which will supply it to customers.
GE Aviation is not only helping airlines fly straight — it is helping them fly smart, too. Emirates, for example, is adopting a GE Aviation data and analytics platform that will allow airline analysts and pilots to understand how their planes are operating with a high degree of precision, accuracy and automation.
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