General Electric is looking to make its recent bounce back permanent, with Chairman and CEO Larry Culp laying out his vision for the company’s turnaround in a letter to shareholders on Tuesday as part of GE’s annual report.
GE is looking to focus and rebuild around four businesses under Culp, the letter said: Power, renewable energy, aviation and healthcare. The letter focused on the company’s aims to improve GE’s cash generation, while also cutting costs, and eventually restoring the once-treasured dividend.
“We intend to maintain a disciplined financial policy, targeting a sustainable credit rating in the single-A range, GE industrial leverage of less than 2.5x net debt*-to-EBITDA, a GE Capital debt-to-equity ratio of less than 4-to-1, and ultimately a dividend level in line with our peers,” Culp said in the letter.
Culp slashed the quarterly dividend to a penny a share at the end of last year. The move freed up about $4 billion of cash for GE but Culp has continued to look at ways to get value from GE assets. In a surprise move on Monday, GE announced it was selling its biopharmaceutical business to Culp’s former company Danaher in a $21.4 billion deal. Beyond the cash, Danaher also will assume certain GE pension liabilities – another win for the company.
While Culp’s predecessor John Flannery wanted to trim GE down to three business, Culp expressed confidence in the company’s ability to center around four.
“Once we put our balance sheet in a healthier place, we’ll be in a better position to play offense across all our businesses,” Culp said in the letter.
Culp also pointed to the value coming from the merger of GE’s transportation with Wabetc, as well as the planned exit from the oil services business of Baker Hughes. GE is “pursuing an orderly separation” from its stake in BHGE, “to maximize value for both companies,” the letter said.
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