GE predicts sales growth and cash returns
General Electric expects its revenue growth to accelerate next year as the US economy continues to strengthen, the US manufacturing and financial group told investors on Wednesday. It also forecast double-digit growth in earnings from its industrial operations, offsetting a decline in profits at GE Capital, its finance arm. In an annual presentation to analysts and investors, Jeff Immelt, GE’s chief executive, said the company would have a "ton of cash", with about $90bn available over the next three years, much of which could be used for share buybacks and raising the dividend. Mr Immelt said he expected "pretty good" 4 per cent to 7 per cent organic growth in industrial revenues next year, an acceleration from the roughly 2 per cent rise expected for 2013, which is at the bottom end of the 2 per cent to 6 per cent range the company forecast a year ago. He also projected a continued widening in profit margins, although at a slower pace than this year, when GE expects a 0.7 percentage point increase to 15.8 per cent, helped by a cost-cutting programme that has cut administrative expenses as a proportion of sales. He set a margin target of 17 per cent for 2016. GE last week announced a 16 per cent rise in its quarterly dividend, the largest since 2010, which Mr Immelt said reflected a plan for the proportion of earnings paid out to shareholders to"drift up". The $90bn of available cash will be generated by GE’s industrial and financial operations, and from the planned spin-off of the North American retail finance business, which is scheduled for 2014-15. A chart in GE’s presentation suggested only about a quarter of that cash would be needed for capital investment and organic growth, with the rest available for dividends, share buybacks and acquisitions. Mr Immelt reiterated his previous statements that GE was not looking for a large deal, saying it was focused on businesses valued in the $1bn-$4bn range, usually with focused technology. "We just don’t plan to change that," he said. "We see a lot of good deals that we like in that context." The prediction of faster revenue growth is based on GE’s expectation that the US economy is continuing to strengthen, while Europe remains "sluggish". In spite of the slowdown in China’s economy in recent years, Mr Immelt said the country was still "a positive", as GE’s businesses such as healthcare and aviation benefited from the country’s shift to providing more consumer goods and services. He said there were still great opportunities in China. In five years' time, the markets for medical diagnostic imaging equipment and gas-fired power generation could be bigger in China than in the US, while the market for commercial aviation could be about the same, he said. GE’s shares rose 1.4 per cent to close at $27.41