GE said its power unit is showing “signs of stabilization” but the division still faces challenges.
Gas Power orders were up 27% reported and 28% organically, including orders for 16 heavy-duty gas turbines and four aeroderivative units, and Power Portfolio orders were down 62% reported and 32% organically, largely driven by Steam Power Systems order timing, the company reported. Revenues of US$4.7 billion fell 25% reported and 5% organically. Segment profit of $117 million was down 71% reported and 69% organically. Gas Power revenues and margins declined, principally driven by lower volume and mix, the company said. Gas Power fixed costs were down 10% from the same period last year. The team continues to focus on reducing cost and improving operations.
“We made steady progress on our strategic priorities in the second quarter. Our top-line growth was solid, and Power made meaningful improvements on fixed cost reduction and project execution,” GE Chairman and CEO Larry Culp said in a statement.
During a conference call, Culp said the Power business has made strides in improving efficiencies, from making better choices in EPC partners to managing the sales process to scheduling projects. The whole company has been planning more conservatively, especially the Power business.
“We are writing a better book of business for the future,” he said.
Still, “I don’t want any of this to sound like we’re claiming victory,” Culp said, noting that there are still improvements to be made in the Power division, including in services after sales.
“We are not great in terms of our on-time delivery on parts and services, we’re probably in the 75-85% range,” Culp said. “Get to root cause, we can fix that.”
When asked about how the company is planning to adapt to the changing energy landscape, Culp noted that he’d recently returned from a trip to China and other Asian countries and seen “keen interest” in adding gas capacity as that region focuses on energy growth and the transition to cleaner energy.
“We’re bullish on that part of the world with respect to the gas business,” Culp said.
“As we see the transition from coal and nuclear to other, cleaner sources, gas is a beneficiary of that, so we’re trying to make sure that we’re plugged in country by country, customer by customer where we can be part of that.”
GE is developing energy storage solutions under its Renewables portfolio and “we don’t talk a lot about that.”
“Big picture, making sure we have a best-in-class gas business during the energy transition while continuing to invest largely in our onshore and offshore wind businesses is the way we are positioning ourselves for the energy transition,” Culp said.
As previously reported, the company sold down its stake in Wabtec Corp from about 25% to about 12%, resulting in US$1.8 billion of cash proceeds.
Chief Financial Officer Jamie Miller said GE had made “meaningful progress” in the Gas Power division’s goal of cutting US$800 million in fixed costs in the next two years. She said the division had cut 1000 employees in the first half of the year and had closed nine offices and two warehouses.
The company plans to decrease its number of offices by 25% and its warehouses by a third over the next two years.
GE also announced that Miller will transition from her role as CFO. GE has initiated a search to identify its next CFO and Miller will remain in her role to assist with a smooth transition. Miller, who joined the company in 2008 as CAO, was appointed as CFO in October 2017.