GE’s turnaround gains traction as quarterly free cash flow surges

Boston-based industrial conglomerate General Electric (GE) has predicted free cash flow of US$2.5 billion to US$4.5 billion this year after generating cash flow of US$4.4 billion in the fourth quarter. These figures indicate that GE’s Chief Executive Larry Culp’s 2018 turnaround plans are gathering steam, having helped drive cash savings and rendering GE’s businesses more profitable.

GE’s power division reported a double-digit growth in equipment orders despite the company’s decision to exit the coal-fired power plants business. Culp has described GE’s turnaround as “a game of inches.” In a phone interview, he said the company still has a lot to do. He said the company’s 2021 outlook was “achievable” on the back of a “strong” performance in healthcare and “continued progress” in its power and renewable businesses. “Those three businesses, for the most part, have found a level of stability and relative predictability amid the pandemic,” he told Reuters news agency.

Equipment orders for renewable energy grew for the first time since the third quarter of 2019, with substantial onshore wind orders in North America and offshore wind orders from the Dogger bank wind farm in the U.K. GE’s shares have gained over 60% since late October with the hope that recovery in air travel would boost its aviation business, usually its most profitable and most cash-generative segment.  The company, however, expects aviation revenue to be flat to up this year with air traffic forecast to recover in the second half. Culp added that while the return of Boeing Co’s 737 MAX jets – which use GE’s engines – is a “positive” for the conglomerate, it will not change the trajectory of its aviation business in the near-term.

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