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11 Oct 02. GE’s third-quarter 2002 earnings of $4.1bn, or $.41 per share, increased 25% over third quarter 2001, and year-to-date cash flow from operations, excluding progress collections, increased 16%, GE Chairman and CEO Jeff Immelt announced today.

“GE delivered 41 cents per share and strong cash flow growth in what continues to be a more difficult economic environment than anticipated,” Immelt said. “We are managing through a variety of short-term challenges at some of our businesses. However, in total, GE continues to deliver. This is a tribute to the strength of the GE business model – a great set of leading businesses with strong growth capability and exceptional cash discipline.”

Financial highlights include:
Earnings rose 25% to $4.087bn (2001:$3.281bn) and earnings per share (EPS) increased 24% to $.41 (2001:$.33). Power Systems, NBC, Commercial Finance and Consumer Finance all contributed double-digit earnings growth. Consolidated Revenues rose 11% over third quarter 2001 to $32.6bn; excluding the GXS sale, revenues rose 9%. Industrial revenues, excluding the sale of GXS, grew 6%, with double-digit growth at NBC, Specialty Materials and Industrial Systems. Revenues at GE’s financial services businesses were $15.0bn, up 13%, reflecting last year’s Sept. 11-related reduction in net reinsurance premiums earned. Net revenues(revenues less interest costs) at Commercial Finance, Consumer Finance
and Equipment Management grew 19%.

Cash generated from GE’s operating activities, excluding progress collections, was a record $9.6bn for the first nine months of 2002, up 16% from $8.3 billion last year. Reported cash flow from operations was $5.7bn, which, reflecting the record progress collections in 2001, was 51% lower than last year’s reported $11.7bn. GE returned $6.9bn to shareowners in the first nine months of 2002 through $5.4bn in dividends and $1.5bn in share repurchases.

GE Aircraft Engines (GEAE) and CFMI (jointly owned by GEAE and Snecma) won $1.0bn in commercial engine orders in the quarter. GEAE continued to invest in a wide range of development programs, and made the first flight tests of the world’s most powerful jet engine, the GE90-115B, and initial tests of the CF34-10 regional jet engine for the Embraer 190/195. The GE-90 will power Boeing’s extended-range 777, test flights of which will begin early next year; regional jets are the fastest-growing sector of commercial aviation. Firm and option orders for CF34 engines, including orders received in the quarter from Alitalia
and Jet Airways, total $7.1bn. During the quarter GEAE also received more than $2.3bn in military contracts, including a multi-year $1.9bn U.S. Navy procurement contract for the F414 engines, devices and spare modules that power the Navy’s advanced F/A-8E/F Super Hornet fighter jet.

Comment: Although it announced job cuts this week GE’s engine division is in fairly good shape with military business powering ahead. When will the big shake out occur in the engine sector is the question being asked? Rolls-Royce is down from 250 to 99p this year over continuing accounting worries and civil airline downturn and would appear the most vulnerable of the top three at the moment. Reports of the CEO of United Technologies, Pratt & Whitney’s parent being in the UK over the past few months could signal an interest from this quarter?

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