General Electric is planning to sell another of its smallest industrial units as it continues to streamline its operations.
In a presentation for financial analysts, GE said it expected to raise $3 billion from the sale of the Industrial Solutions business, which supplies equipment to the electrical-distribution and grid industries.
Another $1 billion will come from the previously announced sale of GE’s water treatment business, the company said. The two units account for $5 billion in combined annual revenue.
“The announcement continues a trend of the past three years, as [CEO Jeff] Immelt has pared back businesses in the sprawling conglomerate, betting that GE can grow faster by focusing more narrowly on heavy industrial equipment and building a service business rooted in software and the digital world,” The Wall Street Journal said.
Immelt has signed deals to sell $195 billion worth of businesses, including the bulk of the GE Capital financial services unit. “We’ve made the company simpler,” he told analysts. “We’ve made the company deeper.”
GE said in October it would sell GE Water by mid-2017 and put the proceeds toward the integration of the oil services firm Baker Hughes, in which it plans to purchase a nearly two-thirds stake for $7.4 billion.
The industrial solutions business has about 13,000 employees and 30 plants globally.
According to Immelt, the company is still on track to hit the key investor target of earnings of $2 per share in 2018. “GE expects to have $10 billion in unallocated capital after the two [industrial unit] sales, which could go a long way in its 2018 push,” TheStreet said.
For next year, Immelt predicted GE would generate operating profits of about $19 billion and around $135 billion in revenue, with organic revenue growth of between 3% and 5%.
“The forecast for 3%-5% organic growth seems a bit ambitious given the current slow-growth macro outside the U.S.,” RBC Capital Markets analyst Deane Dray said. But he added, “We liked hearing that GE still has about $10 billion of unallocated leverage capacity.”