General Electric hit by revenue slowdown

General Electric, the largest US industrial group by market capitalisation, reported a 7 percent rise in pre-tax profits and earnings in line with analysts' expectations, but surprised with slower-than-expected growth in revenues.

It also suffered a fall in orders as a result of plunging demand for wind turbines.

Pre-tax profits were USD 4.03 billion in the three months to September, on revenues up 3 percent at USD 36.3 billion.

Revenues were slightly short of analysts' average expectations of about USD 37 billion, and GE cut its guidance of revenue growth for the full year. It now expects an increase of about 3 percent, compared to a previous projection of 5 percent.

The news hit the company's shares, which were down 2.6 percent in early US trading at USD 22.21.

GE said the slower projected revenue growth was a result of GE Capital, the finance division, shrinking faster than previously planned, as part of its strategy of reducing the group's reliance on financial services.

Adjusted earnings per share, excluding pension costs, were in line with forecasts at USD 0.36, up an underlying 13 percent on the third quarter of 2011.

The group also reiterated its guidance that it expected double-digit earnings growth for the year as a whole.

Jeff Immelt, the Chief Executive, said in a statement: "The overall environment remains challenging, but GE continues to execute on our growth strategy."

He pointed to the company's success in increasing margins at its industrial businesses by 0.7 percentage points compared with the third quarter of 2011 - a feat that some analysts had expected would be difficult given the slowdown in the world economy.

While several companies have been warning of weaker demand in emerging economies, GE said revenues in its "growth market" businesses were up 9 percent, with double-digit growth in China, Africa and Latin America.

However, one conspicuous weak spot was demand for wind turbines. GE is the market leader in the US, where fears that a critical tax credit will not be renewed at the end of the year have caused the flow of new orders to dry up.

Orders for GE's industrial businesses were down 5 per cent at USD 21.5 billion, although excluding wind and currency effects they were up 4 percent.

The strongest growth came from the transportation business, which builds locomotives, where pre-tax profits were up 35 percent at USD 265 million, but there was also a strong performance from energy infrastructure, including gas and wind turbine, power management equipment and service for the oil and gas industry, where pre-tax profits were up 13 percent at USD 1.7 billion.

At GE Capital pre-tax profits were up 10 percent at USD 1.78 billion.

The group's reported corporate tax rate was 14 percent, up from 12 percent for the equivalent period of 2011.

Although GE reiterated its plan for GE Capital to become a "smaller, more focused" business, its contribution to pre-tax profits rose slightly to 44 percent, from 43 percent in the third quarter of 2011.

Mr Immelt said: "The global economy is uncertain, and we are prepared for a variety of economic outcomes. We will continue to invest to win in our markets, while aggressively managing our overall cost structure."

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