“The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March,” CEO Larry Culp said in a statement.
Yet GE’s industrial free cash flow burn rate nearly doubled during the first quarter as the pandemic struck. Its adjusted profit dropped by a deeper-than-feared 62%.
Earnings at GE’s aviation, financial services and renewable energy divisions all fell. GE Power swung to a loss of $129 million. The only division to grow its bottom line was GE Healthcare, which makes MRI machines, CT scans and other medical equipment.
Revenue, however, only fell by 5% to $20.5 billion, beating estimates.
The second quarter will be worse
GE warned that its results will only get worse from here because the second quarter will be the first full quarter in which the global economy came to a standstill because of the coronavirus pandemic. The company said it expects its results will “decline” compared with the first quarter.
Like much of Corporate America, GE indicated it is highly uncertain about the future.
Citing the “evolving nature of the COVID-19 pandemic,” GE said it can’t forecast “with reasonable accuracy the full duration, magnitude and pace of recovery” across its business. GE withdrew its guidance for 2020 earlier this year.
“While there are many unknowns, there will be another side — planes will fly again, healthcare will normalize and modernize, and the world still needs more efficient, resilient energy,” Culp said.
Jet engine orders nosedive
GE said it expects the aviation business will recover slowly from the “unprecedented decline” of 2020.
The timing of the crisis is challenging for GE because its turnaround hinged on continued economic growth. Smaller profits and larger cash burn will give GE fewer resources to repay debt and invest in the future.