(Reuters) – General Electric Co (GE.N) slashed its quarterly dividend to just 1 cent per share and said it would split its power unit into two businesses as new Chief Executive Larry Culp took his first steps to revive the struggling conglomerate.
FILE PHOTO: The logo of Dow Jones Industrial Average stock market index listed company General Electric is shown at their subsidiary company GE Aviation in Santa Ana, California, U.S., April 13, 2016. REUTERS/Mike Blake/File Photo
GE reported a $22.8 billion loss for the third quarter on Tuesday, largely due to a writedown in the value of its GE Power business. The power business also lost $631 million in the quarter, GE said.
“My priorities in my first 100 days are positioning our businesses to win, starting with Power, and accelerating deleveraging,” Culp said in the results statement.
GE said it would separate its gas turbine and services business from other parts of the power unit, a move that would effectively eliminate the Power headquarters structure.
GE did not cut its earnings forecast for the year, even though it signaled such a change at the start of the month, and analysts had cut estimates for adjusted earnings to 88 cents a share, on average, according to Refinitiv data, compared with GE’s current range of $1.00 to $1.07.
A GE spokeswoman said the company was not sticking to the old targets, but was not providing new targets just yet.
GE shares were up about 2.8 percent at $11.40 in pre-market trading.
GE picked Culp to succeed Flannery on Oct. 1, the day GE disclosed it would write off substantially all of the $23 billion of goodwill for its power division.
The charge reflects both the cost of GE’s $10 billion acquisition of power assets from Alstom SA (ALSO.PA) in 2015, and GE’s view that promised profits from power are now unlikely.
“They are acknowledging that it is not going to turn around in a hurry,” said Paul Healy, a professor at the Harvard Business School who focuses on corporate financial reporting.
The struggle at power, where orders fell 18 percent and revenue fell 33 percent in the quarter, mirrors a global decline in demand for new fossil-fuel plants caused in part by falling costs of solar and wind power. GE bet heavily on fossil fuels with its 2015 power acquisition, its largest ever, just as the market turned.
Credit agencies have since cut GE’s ratings, increasing its debt costs, and its financial challenges, which have prompted talk that it will issue stock to raise capital, limit the funds GE has to fix its power division, according to analysts.
Reporting by Alwyn Scott in New York, Rachit Vats in Bengaluru; editing by Patrick Graham and Nick Zieminski