GE Power Sees Sales Slip, But Revenue Up, In Third Quarter
By Jack Burke28 October 2020
GE Power saw sales drop 12% in the third quarter of 2020, while revenues increased 3%, driven in large part by improved cost productivity and a cut in fixed costs, the company reported.
Revenues for the quarter reached US$4.025 billion, up from US$3.926 billion for the same period in 2019. Profit was also up by US$300 000.
“From an operations perspective, we are working within our supply chain and with our suppliers to catch up on parts and project scope that were delayed as a result of COVID-19,” the company reported in its quarterly financial results. “Despite difficult travel and customer site restrictions, we continue to service our customers’ installed base and expect to complete roughly 95% of all planned outages in the year.”
From a market perspective, both gas-based electricity generation and GE gas turbine utilization has remained stable, the company said. GE’s ability to close transactions, particularly services parts & upgrades, has been impacted by constrained customer budgets and access to financing due to oil prices and economic slowdown, especially in Gas Power.
“Although there may be market challenges in the near term, we believe gas will play a critical role in the energy transition and our view of the market has not materially changed, albeit timing on new orders is harder to forecast,” the company said. “Power continues to right-size its business to better align with market demand and driving its businesses with an operational rigor and discipline that is focused on its customers’ lifecycle experience. In Gas Power, we continue to size the business for a 25-30 GW market, although acknowledge that the size any given year can vary. We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles and we have a high confidence to deliver for our customers.”
Looking ahead, GE Power said it anticipates the power market to continue to be impacted by overcapacity in the industry, increased price pressure from competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of working in emerging markets.
Market factors such as increasing energy efficiency and renewable energy penetration continue to impact long-term demand, the company said.
“As such, we announced this quarter that we will be exiting the newbuild coal power market, while continuing to service our customers’ installed base,” the company stated. “We continue to invest in new product development, such as our HA-Turbines, and upgrades as these are critical to our customers and the long-term strategy of the business. Our fundamentals remain strong with approximately US$79 billion in backlog and a gas turbine installed base greater than 7000 units, including approximately 1800 units under long-term service agreements.”
The company had orders for 17 gas turbines in the quarter, making for 32 orders so far in 2020. That compares with 52 for the first three quarters of 2019.