That was one of the takeaways from GE’s Investor Outlook, an annual overview the company gives to investment professionals.
The US$120 billion company—whose business units stretch from healthcare to jet engines—said it power division had “signs of progress” by reigning in costs and by improving profit margins
“Last year, we shared that power is on a multi-year journey, this still holds true,” said Scott Strazik, CEO of GE Power. But “both gas power and the power portfolio need to do better.”
Strazik said the market for gas turbines seems to be stabilizing. According to data cited by Strazik, there were 39 GW worth of large gas turbine orders in 2019, up from 29 GW in 2018. Of those 2019 orders, 16 GW were GE turbines, compared to 10 GW in 2018.
Strazik said those gas turbine orders were being driven by replacements for coal and nuclear power plants as well as the expansion of liquefied natural gas (LNG) globally. He said GE had 18 orders of HA units in 2019 and that, overall, the company expects to ship 45-50 gas turbines in 2020, up from 38 in 2019.
The company will continue to drive costs down, Strazik said. The power division cut fixed costs by 10% in 2019, in part by reducing its workforce by about 2000. The company expects to cut another 10% of fixed cuts in 2020, he added.
GE’s Power Portfolio business, which includes steam turbines, power conversion and nuclear energy products, will continue to focus on profitable markets in marine, oil and gas and other segments, said Russell Stokes, CEO of the Power Portfolio.
Stokes said GE would cut costs in the steam turbine business in part by transitioning its manufacturing footprint to lower-costs regions. The company was also adjusting to new market dynamics. GE’s steam turbines are often used in coal-powered power plants.
“Given the realities around coal, the team is actively adapting its business strategy, focusing on global opportunities to grow in nuclear and biomass with the market’s best-in-class steam turbine.”
GE CEO Larry Culp noted that the company as a whole expects to see a US$300-500 million impact on first-quarter free cash flow because of the coronavirus. Most of the impact will be in the aviation group.