GE second-quarter profits fall by 47% - Revenue dragged down by finance arm

GE second-quarter profits fall by 47% - Revenue dragged down by finance arm
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: July 17 2009 13:13 | Last updated: July 17 2009 16:21
http://www.ft.com/cms/s/0/82f67586-72c9-11de-ad98-00144feabdc0.html


General Electric, the US industrial group, said on Friday that its second quarter profits fell by nearly half as revenues plunged and its industrial division suffered amid weak global demand.

Net income from continuing operations at GE fell by 47 per cent to $2.9bn, or 26 cents a share, in the second three months of the year. The results beat analysts’ expectations of 24 cents, but revenues disappointed by dropping 17 per cent to $39.1bn.

“In a global economic environment that continues to remain challenging, GE delivered solid second-quarter business results,” Jeff Immelt, GE’s chief executive, said in a statement. “We are executing through the recession by aggressively controlling costs and driving working capital improvements while continuing to invest for future growth.”

GE’s broad array of businesses makes it a bellwether company to gauge the state of the economy. Investors were rattled earlier this year when GE slashed its dividend for the first time since 1938 and lost its triple A rating from Standard & Poor’s.

The company’s financing arm, GE Capital, continued to struggle in the second quarter, with earnings off by 80 per cent compared with the same period a year ago. In spite of its struggles, Mr Immelt said the division was “ahead of schedule” in its timetable to become a more “focused” financial services company and was on track to be profitable for the year.

The industrial, technology and media divisions also saw profits slim. Earnings at NBC Universal were off by 41 per cent as advertising revenue plunged. Only GE’s energy infrastructure unit showed growth in the quarter.

The Connecticut-based company has increasingly looked overseas to expand into markets with more growth potential. GE boasted that industrial revenues were up by 31 per cent in China and 46 per cent in India.

Last month GE announced a $500m deal to supply new gas and steam turbines to the Kingdom of Bahrain as the company continues to push for a greater presence in the Middle East to counteract troubles in its domestic market. It also recently announced an $8bn commercial finance joint venture with Mubadala Development, Abu Dhabi’s state investment vehicle.

Shares of GE fell by 6.37 per cent to $11.61 in mid morning trading on Friday and are off by 62 per cent from their 12-month high.