GE sees improvement in company businesses in H2

© Reuters. A traffic light is seen in front of a logo of General Electric at the company's plant in Birr, Switzerland June 17, 2019. REUTERS/Arnd Wiegmann

By Rajesh Kumar Singh

CHICAGO (Reuters) -General Electric Co on Thursday said it expects an improvement across its businesses in the second half of the year despite persistent inflationary and supply chain pressures.

But Chief Financial Officer Carolina Dybeck Happe said the company expects to burn cash in the current quarter despite an improvement in cash flow.

GE's shares were down 1.6% at $71.30 in afternoon trade.

The Boston-based industrial conglomerate last month said it was trending toward the lower end of its full-year earnings forecast, citing fresh COVID-19 pandemic-related lockdowns in China as well as the war in Ukraine.

To mitigate the impact, the company has raised prices for its products and is invoking price escalation clauses in its service contracts. It is also trying to find alternative sources for parts and improve productivity to reduce cost.

While the company has not seen any "material" change in the COVID-19 situation in China, Happe said the measures are expected to result in an improved performance in the second half of the year.

"Nothing is certain in an environment where so much is changing day to day," she told Goldman Sachs (NYSE:GS) Industrials & Materials Conference. "But clearly, we have a path to significant growth in the second half."

The company has projected adjusted profit for 2022 to be in the range of $2.80 to $3.50 per share. It also expects to post high-single-digit revenue growth this year and generate $5.5 billion to $6.5 billion in free cash flow.

Happe said GE expects to generate closer to about 55% of the projected revenue, 65% of operating profit, 75% to 80% of net earnings, and more than 100% of free cash flow in the second half of the year on the back of "significant" growth in aviation and healthcare businesses.

In case full-year earnings do come at the lower end of its estimate, Happe said it would reduce the odds of the company generating more than $7 billion in free cash flow next year.

"It's going to be less of a plus, but we do have a path to $7 billion of free cash flow," she said.