GE sees 2015 profit pressured by 'sluggish' oil business

Tue Dec 16, 2014 6:16pm EST
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By Lewis Krauskopf and Sagarika Jaisinghani

NEW YORK (Reuters) - General Electric Co gave a 2015 profit forecast range on Tuesday that barely included Wall Street's target as the U.S. conglomerate braced for a "sluggish" oil and gas sector due to plunging crude prices.

GE said it expects earnings from its aviation, power & water and other industrial units to rise at least 10 percent next year as it focuses on increasing its profit share from these businesses to 75 percent by 2016 from 55 percent in 2013. The switch is aimed at reducing GE's exposure to its finance business.

Meanwhile, revenue from its oil and gas business is expected to fall next year as low prices sparked fears of decreased capital spending by oil companies.

"We're really planning the company for a sluggish oil and gas sector in '15," Chief Executive Jeff Immelt told investors in New York on Tuesday.

GE's oil and gas business, which makes drilling, compressors and other equipment, accounted for just below 12 percent of total revenue in 2013, but GE has been expanding the business with $14 billion worth of deals since 2007.

"We like it more at $120 a barrel, don't get me wrong, but we like this business," Immelt said.

Global crude prices have fallen by more than 40 percent since June due to oversupply and OPEC's refusal to cut its output ceiling. Brent crude futures fell for a fifth straight day on Tuesday to end below $60 a barrel.

Immelt has been seeking to improve the company's profit margins by cutting costs, and on Tuesday added a new goal of improving gross margin, which stood at 27 percent in 2013, by about 0.5 percentage points in 2015 and 2016.   Continued...

The General Electric logo is seen in a Sears store in Schaumburg, Illinois, September 8, 2014. REUTERS/Jim Young