GE sees risks from war in Ukraine but maintains earnings guidance for 2022

FILE PHOTO: The logo of US conglomerate General Electric is displayed at the company's energy division site in Belfort
FILE PHOTO: The logo of US corporation General Electric is pictured at the site of the company’s energy division in Belfort, France, February 5, 2019. REUTERS/Vincent Kessler

March 10, 2022

By Rajesh Kumar Singh

GREENVILLE, SC (Reuters) – General Electric Co on Thursday reiterated its 2022 earnings guidance, but said Russia’s invasion of Ukraine has increased business uncertainty.

The Boston-based industrial conglomerate warned last month that ongoing supply chain and inflationary pressures would hurt its profits in the first half of this year.

A surge in global commodity prices following Russia’s invasion of Ukraine has worsened the situation.

At the company’s first face-to-face investor meeting in more than two years, Chief Executive Larry Culp said the company’s outlook did not take into account the potential fallout from the situation in Ukraine because there was “too much uncertainty.”

“Like any company that is directly or indirectly exposed to what is happening, there is more uncertainty about what lies ahead today than we saw a month ago,” Culp said.

“There really are things we don’t know.”

Culp said GE will be “hyperfocused” on controlling the things it can control.

On Tuesday, the company announced it had suspended operations in the country and was working with authorities to ensure sanctions compliance.

According to Culp, Russia accounts for less than 2% of the company’s total sales. However, the energy business is more country-focused.

Russia’s invasion has also threatened the supply of titanium from the country. The metal is used in the aerospace industry to make landing gear, blades, and turbine disks.

GE said its aviation unit uses Russian supplies for just two parts that it has inventory on the shelf for more than a year. Overall, it gets only 1% of its titanium supplies from Russia.

Rising concerns about the supply chain and inflation have hurt shares in GE, which are down 11% since mid-January. Its shares fell 1.2% to $90.12 in midday trade.

The company has said it will raise prices and try to keep costs in check. It also tries to source alternative parts to meet shortages.

GE, which announced last November that it would split it into three public companies, reiterated the timeline for the spin-off.

The company plans to spin off its healthcare business into a separate public company next year. It would combine its power and renewable energy units and spin off that operation in 2024. After the demerger, it will become an air carrier.

GE expects revenue to grow in the high single digits this year on a more than 20% increase in aviation revenue.

Adjusted earnings for the year are expected to be in the range of $2.80 per share to $3.50 per share. It also expects to increase its profit margin by 150 basis points and generate free cash flow of $5.5 billion to $6.5 billion.

The company expects to generate approximately $10 billion in adjusted operating income and more than $7 billion in free cash flow in 2023.

(Reporting by Rajesh Kumar Singh; Additional reporting by Abhijith Ganapavaram in Bengaluru. Editing by Jane Merriman and Nick Zieminski) GE sees risks from war in Ukraine but maintains earnings guidance for 2022


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