With its stock at its lowest level since 1997, General Electric Co. detailed its plans to reenergize its business ”“ plans that still include its embattled financial and real estate divisions.
Last month, GE announced plans to raise $12 billion in public offerings of stock, and $3 billion more in a private placement with Berkshire Hathaway Corp., along with preferred warrants for the Omaha, Neb.-based company.
GE”™s moves this summer and fall have been aimed at making sure it does not get caught with its pants down, according to Jeff Immelt, CEO, in a conference call with investors: specifically, maintaining its triple-A credit rating and providing additional cash reserves for any contingencies.
“We thought it was smart to have suspenders on suspenders on suspenders in this cycle,” Immelt said in an Oct. 10 conference call with analysts. “I think we”™ve taken some big issues off the table for investors. That”™s what we really wanted to do.”
GE had a $4.5 billion profit in the third quarter on $47.2 billion in revenue, with earnings down 12 percent and sales up 11 percent from a year ago.
GE Energy Infrastructure continues to be the top-performing division, as earnings rose 31 percent to $1.4 billion and revenue 32 percent to $9.8 billion. On the flip side, GE Consumer & Industrial profits dropped 82 percent to $47 million, as sales declined 6 percent to just below $3 billion.
The Fairfield-based conglomerate is the second largest employer in Fairfield County with more than 6,000 workers at last report, half of them in its GE Capital Services (GECS) division.
GECS”™ profits dropped 38 percent in the third quarter to $2 billion, with earnings at Norwalk-based GE Real Estate down 62 percent.
GE Money, whose headquarters was moved this year from Stamford to London, has written off nearly $2 billion in assets in the past two quarters. As bad as the North American mortgage market has been ”“ loans delinquent at least 30 days rose to 6.2 percent of the portfolio ”“ GE Money has fared far worse in Great Britain, where late loans rose more than a full percentage point to 17.8 percent of all loans outstanding.
If there is a silver lining, it is that GE is able to used GECS”™ losses to offset the parent company”™s tax liability, according to Keith Sherin, chief financial officer of GE.
“It”™s one of the benefits of having the whole portfolio together,” Sherin said.
Just 19 percent of GECS assets are in commercial real estate, making the division far more diversified than GE Money which has 37 percent of its assets in residential mortgages. The next largest loan category for GECS is in commercial aircraft leases, constituting 10 percent of the asset base.
The lone GECS unit to carve out a significant profit increase was GE Energy Financial Services, which enjoyed a 20 percent bump on the bottom line.
Sherin said that order cancellations have not increased in big-ticket sectors like energy and aviation energy; one $150 million purchase from an oil company slipped into the current quarter, but the company expects to nail down the deal.
“We”™ll have to see as we go into the fourth quarter whether other orders are impacted by financing,” Sherin said. “I think it”™s a concern and it”™s something we”™re watching. We have not seen it yet.”
