GE’s Culp Issues Investor Letter About Company’s Future

GE’s Culp Issues Investor Letter About Company’s Future

In his first annual letter to shareholders on Tuesday as part of GE’s annual report, Chairman and CEO Larry Culp laid out his vision for the company’s turnaround going into the future. Stocks rose +1.1% after-hours as Culp tried to reassure investors that he has a plan to return the company to a “position of strength” while asking for “support and patience.” Culp reiterated many of his previous statements on the company’s strategy, stressing the need to cut debt and strengthen the power business.

The letter focused on the company’s aims to improve GE’s cash generation while also cutting costs and eventually restoring its dividend. Under Culp’s tenure, GE plans to focus its attention on the Power, Renewable Energy, Aviation, and Healthcare businesses.

“We intend to maintain a disciplined financial policy, targeting a sustainable credit rating in the Single-A range with a GE industrial net debt/EBITDA ratio of less than 2.5x and a dividend in line with peers over time, as well as a less than 4-to-1 debt-to-equity ratio for GE Capital. We expect to make significant progress toward our leverage goals over the next two years,” Culp stated.

“We have more options available to us down the line to generate cash to help bring down our leverage, including our remaining interests in Baker Hughes and Wabtec Corporation and continued flexibility for our go-forward Healthcare business.” Culp continued, “We have too much debt and we need to reduce it thoughtfully and soon. Once we put our balance sheet in a healthier place, we’ll be in a better position to play offense across all our businesses.”

On Monday, GE finalized an $11 billion merger of GE Transportation with Wabtec. The firm plans to sell its remaining 24.9 percent stake by February 2022.

The company this week also sold its biopharma business to Danaher Corp. for $21.4 billion, a transaction Culp said: “demonstrates that we are executing on our strategy by taking thoughtful and deliberate action to reduce leverage and strengthen our balance sheet.”

On top of changes to GE’s operations, Culp also slimmed down its planned new headquarters in Boston. The company plans to reimburse the state for $87 million in incentives it received.

GE also disclosed it shed 30,000 workers last year as it restructured its operations and sold off some business lines.

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