- Walloped by the impact of the COVID-19 pandemic, GE is looking to cut "several hundred million dollars" of costs from its renewable energy division as part of a $2 billion corporate-wide restructuring, Lawrence Culp, chairman and CEO, told analysts during the company’s first quarter earnings call Wednesday.
- The renewable division, which supplies and services both onshore and offshore wind projects as well as grid and hydropower facilities, continues to deliver record numbers of onshore turbines in the Americas, said Culp, though supply chain disruptions are occurring in Europe due to Covid-19. Overall, the division's first quarter sales revenues, at $3.2 billion, were up 26% compared to a year ago, though the division showed a net loss of $300 million due to a one-time accounting adjustment.
- The renewable division also expects to supply its 12 MW Haliade-X turbines to two U.S. offshore projects now targeted to begin in 2022 and 2024. At a height of 850 feet, the behemoth turbines operate with a 65% capacity factor. "Certification for our industry-leading turbine remains on track," said Culp.
GE’s major immediate mission, as described by Culp and Carolina Happe, CFO, in a longer than usual conference call with analysts, is to protect the corporation from the continuing impact of the COVID-19 pandemic that has swept the world, prompting governments to order lockdowns, shutting or curtailing factories, disrupting supply chains and forcing corporations to burn through cash.
The severe impact of the pandemic on GE’s aviation division, cutting orders for new jet engines as well as maintenance services for existing engines in parked aircraft, will affect every division in the company. The only bright spot: GE sold its BioPharma division to the Danaher Corp. in March for $17 billion in cash, saving the company from even more severe restructuring.
Still, the sharp and sudden loss of business in the aviation division as the COVID-19 pandemic spread, has forced the company to focus on major restructuring.
"We estimate the first quarter Industrial operating profit impact from COVID-19 [at] roughly $700 million," said Happe. "Drivers included lower aftermarket sales, project delays and supply chain constraints. Our focus on addressing this pandemic is global. We are targeting more than $2 billion of cost out this year."
As for the renewables division, "there was a limited impact of COVID-19 in the first quarter and our disappointing results continued to be largely about improving execution," Culp told analysts.
Culp said he expects the global economic recovery, assuming the pandemic subsides, will be slow, making it impossible to give analysts revenue and profit guidance for the rest of the year. "We’ve taken guidance off for the year," he told an analyst who had pressed for more specificity. "We’re not putting it back on today."