Q1 2014 Earnings Call Transcript

Transcript Call Date 04/17/2014

Revenues for the quarter were down 14% as we anticipated. Equipment was down 20%, driven by mining of off-highway vehicles down 76%, partly offset by locomotives up 23%. We shipped 178 locos versus 143 a year ago. Service was down 7% on weaker mining parts demand.

Op profit was down 24%. Very strong cost and productivity performance was more than offset by the volume and mix. Margins were down 230 basis points in the quarter.

On Energy Management, the business continues to be a work in progress. We made a lot of gains in restructuring and resizing the business around its cost structure and footprint, were offset by sales softness in marine startup execution. Orders were $2.2 billion. That was down 1%. Digital Energy was up 20% on a large domestic meter order, and Industrial Solutions was up 1%. This was offset by Power Conversion down 16%, with no repeat of first quarter '13 Brazilian drillship orders we took.

The business did continue to build backlog in all its segments, with a total up 17% year-over-year to $4.9 billion. Revenue was down 4% in the quarter, with Digital Energy down 20%, Industrial Solutions down 3%, and Power Conversion down 2%.

Operating profit was $5 million in the quarter. That's down from $15 million a year ago. Despite the poor performance, we continue to get restructuring benefits and reduced SG&A costs. This was more than offset by negative volume and execution challenges. We expect this business to improve its results throughout the year, particularly in the second half.

Appliances and Lighting; Appliances and Lighting had a challenging quarter as well. Appliance revenues were down 3%. The appliance market was down 4% through February, but was much stronger in March to end the quarter flat year-over-year. Housing starts were soft, with single family down 8%, offset by multi-family strength of up 9%. Lighting revenue was down 4%. Our traditional channels in Lighting were down 9%, partially offset by LED growth, up 33%.

Segment profit of $53 million was down 33% in the quarter. Appliance op profit was down 2%, with higher price offset by lower volume and negative productivity and Lighting op profit was down 44%, driven by strong material deflation, more than offset by productivity price and foreign exchange. For both businesses, the last two weeks of March and the first week of April were much stronger. We expect them to be back on track in the second quarter.

Next I'll cover GE Capital. Revenue of $10.5 billion was down 8%, primarily from non-repeat of the 30 Rock sale last year. Assets were down 3% or $18 billion year-over-year. Net income of $1.9 billion was flat to prior year, as lower losses and impairments offset reduced gains, lower earning assets, and tax benefits.

ENI ended the quarter at $374 billion, and was down $28 billion or 7% from last year and down $7 billion sequentially. Non-core ENI was down 16% to $52 billion versus last year.

Net interest margins decreased 11 basis points from 2013 to 4.9%, as a slight improvement in business margins was offset by the cost from carrying higher levels of cash.

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