Oct. 25 (Reuters) – General Electric Co (GE.N) on Tuesday cut its full-year earnings forecast after reporting a decline in third-quarter earnings, mainly due to higher warranty and related reserves at its operations in the field of renewable energy.
However, the company reported much higher-than-expected free cash flow. Quarterly sales also exceeded Wall Street estimates.
Shares of GE fell about 2% to $72.85 in morning trading.
The company, which is in the process of splitting into three companies, faces challenges in its onshore wind operations. The unit, the largest of GE’s sustainable businesses, is experiencing higher raw material costs due to inflation and supply chain pressures.
In the United States, GE’s most profitable market for onshore wind energy, policy uncertainty following the expiration of tax credits for renewable electricity production last year hurt demand, contributing to a 15% year-on-year decline in revenue from renewables. renewable energy in September. quarter.
Chief Executive Larry Culp said onshore wind is “the battleground” for the company as it aims to make its sustainable operations profitable by 2024.
While the reinstatement of the tax credit for wind projects is expected to boost medium to long-term demand in North America, GE expects a renewable energy loss of approximately $2 billion this year.
“In the short term, customers will continue to postpone investments into the future,” chief financial officer Carolina Dybeck Happe said during an earnings call.
The company will reduce the global workforce at its onshore wind power unit by approximately 20% as part of a plan to restructure and resize the company.
The restructuring will cost $600 million but is expected to generate $500 million in annual savings, it said.
GE said it sees “early signs” of improving supply chain issues and is getting better at passing on the higher costs to customers.
Still, supply chain pressures and macros accounted for 4 percentage points of total sales in the September quarter.
GE reiterated that demand for its aviation unit is expected to remain strong, resulting in sales growth of more than 20%. The company reported a double-digit increase in jet engine shipments since the second quarter.
The Boston-based industrial conglomerate now expects adjusted earnings in 2022 in the range of $2.40 to $2.80 per share, compared to $2.80 to $3.50 previously estimated.
It reported adjusted earnings of 35 cents per share, down from earnings of 53 cents per share last year. Excluding a $500 million guarantee and related reserves in its renewable energy business, quarterly earnings would have been 75 cents per share.
Free cash flow in the September quarter was $1.19 billion, much higher than the earlier estimate.
Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Saumyaadeb Chakrabarty, Sriraj Kalluvila, Chizu Nomiyama and Nick Zieminski
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