GE Health targets profit margins, reversing weak performance

Fri Mar 11, 2016 3:06pm EST
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By Alwyn Scott

NEW YORK (Reuters) - General Electric Co's (GE.N: Quote) healthcare business said on Friday its top priority is lifting profit margins that were flat in recent years after it failed to cut costs sufficiently.

The unit expects operating profit margins to widen to 18 percent or more by 2018, up from 16.3 percent last year, John Flannery, chief executive of GE Healthcare, said at an investor meeting.

The company is poised to triple its cost cutting in large part by engineering out costs and introducing new products. It also plans to derive more revenue from digital services.

"Frankly, we didn't grow margin because we didn't drive cost down," in recent years, Flannery said.

GE's healthcare businesses range from large imaging machines to small diagnostic tools and equipment used in drug manufacturing.

Some analysts have wondered if the company might sell some parts of the portfolio, such as its X-ray business, or bulk up areas with acquisitions.

Flannery said portfolio changes were not a big part of the unit's current strategy for increasing revenue and profit margins at the existing businesses.

"We're keeping the X-ray business, period," he said. "It's intrinsically connected to the portfolio" because more than 40 percent of bids the company makes to supply equipment require an X-ray component.   Continued...

The logo of U.S. conglomerate General Electric is pictured at the company's site in Belfort, June 23, 2014.  REUTERS/Vincent Kessler