GE breaks string of profit drops but revenue falls

[July 17, 2010]  WASHINGTON (AP) -- Cost cutting and an improved financial business helped General Electric Co. post its first increase in quarterly profit since 2007 on Friday, but sales remained sluggish for the industrial and financial giant.

The better earnings ended a long string of declines at the Fairfield, Conn.-based company, which makes everything from refrigerators to jet engines. GE's outlook was largely upbeat, helped by improving orders and lower losses and its GE Capital lending unit. It sees profits continuing to grow next year.

But the second-quarter results also reflect challenges posed to big companies by the nation's halting recovery. GE's revenue slipped 4 percent as industries like transportation were down. And GE Capital -- a once reliable source of earnings that was devastated last year by the financial meltdown -- is shedding assets, contributing to the overall drop in company revenue.

CEO Jeff Immelt said the company, which reaches almost ever major part of the economy, sees an uneven recovery unfolding.

"The economy is going to strengthen at different paces around the world," he said.

GE shares fell 4.6 percent, or 70 cents, to close at $14.55 on Friday.

With GE Capital driving less of the company's earnings, GE is now looking to its big industrial divisions to help it recover. Health care, which makes sonograms and other medical equipment, posted a profit gain, as did the energy unit that makes power plant turbines. The NBC Universal entertainment division reported a profitable quarter, as did the consumer appliance unit.

GE's quarterly net income rose 16 percent to $3.0 billion, or 28 cents per share, up from $2.6 billion, or 25 cents per share, a year earlier. Net income was helped by cost cuts of nearly $3 billion.

The company sees 2010 as a turnaround year, and the second-quarter gain provides a much needed boost for the conglomerate that has posted big drops in income recently. The last time GE had a higher profit was in the fourth quarter of 2007.

Last year, GE saw its losses balloon on bad loans at GE Capital, and its stock price fall to a nearly 15-year low. It also suffered the loss of its Triple-A credit rating, and was forced to cut its dividend.

Some key second-quarter results included:

• An $830 million profit at GE Capital, up 93 percent from a year earlier. Units that provide loans for businesses, store credit cards and energy projects improved. GE Capital's lending for office buildings and other commercial properties continued to suffer, with losses growing to $524 million.

• Energy infrastructure profits rose 3 percent to $1.9 billion. Orders rose 20 percent, helped by a big order of power plant turbines for Iraq. Revenue, however, dropped 9 percent.

• GE's technology infrastructure businesses was profits drop 11 percent to $1.5 billion, driven down by weakness in demand for jet engines and train locomotives.

• The company expects to generate between $13 billion to $15 billion in cash this year. Immelt said GE is weighing how to use it, including share buybacks or increasing its dividend next year. GE also said it won't have to put any more money into GE Capital to shore it up, as it has done in the recent past.

• NBC Universal posted a $607 million profit, up 13 percent. GE said the planned sale of a majority stake to Comcast Corp. remains on track.

• Immelt said China is an "immensely strategic market." The company also does not expect any significant fall out from the debt crisis faced by many European nations.

[Associated Press; By STEPHEN MANNING]

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