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General Electric cash flow forecast disappointed, stocks fall

The logo of the US conglomerate General Electric can be seen on October 19, 2019 on the company building in Belfort, France. REUTERS / Vincent Kessler

(Reuters) ̵

1; General Electric (GENE.) Expects to burn more money than expected in the second quarter as the industrial conglomerate is struggling with the weakness of its aviation business due to the coronavirus crisis, CEO Larry Culp said on Thursday.

GE, which manufactures aircraft engines and power plants, even fell 3.6% to $ 7.03 after Culp also warned that the company’s free cash flow for 2020 will be negative.

GE’s free cash outflow is expected to be between $ 3.5 billion and $ 4.5 billion in the second quarter, he said at a conference. According to Refnitiv IBES, this was larger than the analysts’ average outflow of $ 2.5 billion.

The COVID-19 pandemic practically brought air traffic to a standstill and hit GE’s aviation business at a time when the electricity business was struggling with sluggish demand.

The company cut thousands of jobs to save money and last month made its full-year forecast, citing the uncertainty caused by the pandemic.

“Losing so much money is a significant contributor to GE’s increased net leverage,” said John Hch, Gordon Haskett analyst, adding that the amount of GE’s cash outflow is unbalancing most of his industry peers.

Culp said GE’s commercial engine installations would decrease approximately 45% in the second quarter, while aircraft parts sales would decrease approximately 60%.

However, the corona virus crisis has boosted sales of the company’s health products. According to Culp, orders are expected to grow more than 100% in the second quarter.

Reporting by Ankit Ajmera and Rachit Vats in Bengaluru; Edited by Aditya Soni

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