BOSTON (AP) — General Electric slashed its dividend in half as investors gathering in Boston, where Chairman and CEO John Flannery is laying out a significant retooling of the U.S. conglomerate.
The company also released annual profit projections Monday that were well below what Wall Street had been expecting. The developments weighed on the entire industrial sector in early trading.
GE’s quarterly dividend is being cut to 12 cents per share, from 24 cents, starting next month. GE said its dividend had grown too large relative to the amount of cash the company was bringing in.
Flannery says the cost-cutting maneuver is part of the measures GE will undertake to make the company simpler and stronger. General Electric Co. is expected to announce further plans, including a potential reshaping of the company’s health, aviation, lighting and transportation units.
Last month Flannery, who became CEO in August, said that GE would shed business units worth more than $20 billion over the next year or two. It has been paring businesses for well over a decade now.
Flannery said 2018 will be a “reset” year, and projected a profit of between $1 and $1.07 a share. That’s well below the $1.15 a share analysts expected, according to FactSet. GE also forecast weaker cash flows than analysts had projected.
The stock fell almost 4 percent at the opening bell. Flannery has been tasked with reviving growth at GE with the stock down 37 percent this year and trading at five-year lows.
After reporting disappointing third-quarter results in October, Flannery said that aside from the exit from certain businesses, GE was planning major cost cuts across the board. The company has already surpassed its goal of cutting $1 billion in industrial costs this year. It plans more than $2 billion in cuts next year, double the original target, to go with at least $20 billion in divestments over the next year or two, the executive said.
That includes the possible sale of Baker Hughes, the oil and gas company GE bought a majority stake in earlier this year. Flannery said the integration of Baker Hughes into GE’s business is going well, but the company wants to reduce its exposure to volatile energy prices.
The company also said Monday that it will shrink its board of directors to 12 members from the current 18 by April. Flannery said there will be three new directors with “relevant industry experience,” annual elections for board members, and a term limit of 15 years.
Last month GE said two of its vice chairs will leave at the end of the year as the company continued to announce changes at the top after the end of Jeffrey Immelt’s 16-year run.