By Thomas Gryta 

General Electric Co. reported another quarter of weak profits, as poor results in its core power business and legacy problems in its GE Capital unit continued to weigh on the conglomerate.

The company said Thursday it had agreed to pay $1.5 billion to settle a long-running investigation by the Justice Department into a defunct subprime-mortgage business called WMC.

The government was investigating whether the business violated federal lending laws as part of a larger probe into the subprime mortgage crisis. The charge was in line with the amount GE had previously set aside for a potential settlement.)

The fourth-quarter profit attributable to GE was $761 million, compared with a loss of $10.82 billion a year earlier, when it booked a large charge for a shortfall in reserves at a defunct GE Capital insurance business.

Revenue rose 5% to $33.28 billion, including a 25% decline in power business, which makes turbines for power plants, and a 21% jump in its aviation business, which manufactures jet engines. Those are the two biggest units that will be the core of the company after it moves ahead with plans to break itself apart following a difficult two years.

Adjusted earnings per share were 17 cents, missing an analyst projection of 22 cents a share, according to Refinitiv, while revenue exceeded a consensus view of $32.6 billion.

Larry Culp, who took over as Chief Executive in October, has continued a plan to break off a number of GE businesses, while pushing to improve cash flow. He has prioritized shrinking GE's more than $100 billion in debt.

The first outsider CEO of the conglomerate, he has yet to detail his strategy or deeper plans. The company didn't provide any financial projections in Thursday's press release, but Mr. Culp is holding a conference call at 8 a.m. ET.

To raise cash quickly, Mr. Culp slashed the once reliable quarterly dividend to a token 1 cent per share, struck a deal to sell part of GE's stake in Baker Hughes and revamped a deal to sell the transportation division, which is slated to close next month.

Mr. Culp must contend with continuing government investigations into GE's accounting. Both the Justice Department and the Securities and Exchange Commission are investigating GE's revenue recognition of service contracts in its power business, a $22 billion charge booked in the third quarter and the process that uncovered a shortfall in its reserves for a defunct insurance business.

GE has denied wrongdoing and said it is cooperating with the investigations.

Write to Thomas Gryta at thomas.gryta@wsj.com

 

(END) Dow Jones Newswires

January 31, 2019 07:33 ET (12:33 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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