General Electric Co. (NYSE:GE) on Friday reported an 8 percent drop in fourth-quarter earnings in its industrial businesses, hurt by weakness in divisions catering to the oil and gas sector
Profit fell in five of GE’s eight industrial business units, including by 10% in its power turbine business and by 8% in its health-care unit, which makes imaging machines like MRIs. Overall industrial revenue declined by 1% in the quarter, largely from a 16% drop in GE’s oil and gas unit.
GE had warned investors to expect declines in the oil business, as the company’s customers slash capital spending amid the long decline in crude oil prices. For the year, GE saw revenue in the oil business slide 14% to $16.45 billion.
Chief Executive Jeff Immelt described the current environment as “slow-growth” and noted that the first few weeks of the year have been “especially volatile,” in prepared comments. The company backed its 2016 outlook.
GE is in the midst of a long transformation to refocus the conglomerate on its core industrial businesses like aviation and power. In the latest quarter, GE closed on its acquisition of Alstom’s energy assets, bulking up its core power equipment business. GE noted that its backlog hit a record $315 billion, up 18% over the prior year, due to the acquisition.
Meanwhile, GE continues to wind down its lending business that has long been a distraction for investors who believed it dragged on the company’s share price. GE has said it has sale agreements for $157 billion of the roughly $200 billion in finance assets up for sale.
Overall for the period ended Dec. 31, GE reported a profit of $6.28 billion, or 64 cents a share, compared with a profit of $5.15 billion, or 51 cents a share, a year earlier.
Excluding the finance businesses being wound down, GE reported a profit of 52 cents a share, while revenue came in its $33.8 billion.
GE took a number of actions to reshape its industrials segment in the quarter. In addition to closing on the Alstom deal, its largest acquisition ever, GE split out its renewable energy businesses, including new assets from Alstom, into a stand-alone business unit.
Backing out the impact of acquisitions and foreign exchange, GE’s industrials segment posted a 1% decline in both organic profit and revenue for the quarter.
Organic profit in its power business fell 6%, though orders jumped 40% in the quarter.
Overall, industrial orders were up 3%, led by a 40% increase in orders in the power segment and a 66% jump at its transportation unit. GE recently landed a $2.5 billion deal to supply 1,000 locomotives and services in India. Orders for oil-and-gas equipment used in things like offshore drilling tumbled 52% from the prior-year.
Industrial margins improved to 18.3% from 17.5%, excluding restructuring charges and other gains.