The lockdowns stemming from China’s zero-Covid strategy have worsened General Electric’s supply chain challenges, prompting the US industrial conglomerate to caution on Tuesday that its full-year results would come in at the low end of its previous expectations.
Shares in GE fell 10 per cent to $80.71 in morning trading in New York after chief executive Larry Culp detailed a series of “macro headwinds” putting pressure on revenues, as the 130-year-old group prepares to split into three smaller companies.
GE blamed “significant supply chain constraints” for lower output in its commercial aircraft engines business and for weaker revenue growth in its healthcare division, where shutdowns in some regions of China were also affecting demand.
In addition, the company took $230mn in pre-tax charges for the three months to March 31 to reflect the impact of Russia’s invasion of Ukraine.
The charges largely related to its aviation and power businesses, it said, and reflected impairments of receivables, inventories and other assets as well as investments in Russia, where it has suspended operations that accounted for less than 2 per cent of group sales.
GE said revenues of $17bn for the first quarter were largely unchanged from a year ago, with an 11 per cent improvement in its order book and a recovery in service revenues masking a divergence in the performance of its largest businesses.
Aviation orders, which had been hard hit by pandemic disruptions to the travel industry, rebounded 31 per cent to $7.2bn, but renewable energy orders were down 21 per cent at $2.8bn. The renewables business suffered a fall in orders for onshore equipment, which GE said reflected “inflation-driven customer delays” and a broader decline in the US market.
The group now expects to report adjusted earnings per share at the low end of the $2.80-$3.50-per-share range it gave in January, pointing to the war in Ukraine and the duration and magnitude of the pandemic’s impact on China as the biggest challenges over the past three months.
For the first quarter, GE reported a net loss per share of 74 cents, slightly above the 75 cent loss it reported a year earlier. Adjusted earnings per share were 24 cents, up 11 cents and above Wall Street’s estimates.