GE Additive
GE Additive's Arcam EBM centre of excellence.
GE Additive's Arcam EBM centre of excellence.
GE has announced the results of a “challenging” second quarter for 2020, including significant goodwill impairment charges linked to its additive manufacturing activity.
The company has taken action to overcome the negative impact of COVID-19 and identified a number of “significant items” which are said to have affected its financial results. Of note to the AM industry, these items include non-cash pre-tax goodwill impairment charges of 877 million USD related to additive.
In the report published last week, GE stated:
During the second quarter, GE also recognized several significant items that affected its financial results, including:
- Non-cash pre-tax goodwill impairment charges of $877 million related to Additive within GE's Aviation segment and $839 million related to GECAS within GE Capital, which together negatively impacted continuing EPS (GAAP) by $0.18.
GE purchased metal 3D printing companies Arcam and Concept Laser in a landmark 1.4 billion investment back in 2016. In a statement at the time, GE said it expected to grow the new additive business to 1 billion USD by 2020 at attractive returns and expected 3-5 billion USD of product cost-out across the company over the following ten years. The company has continued to expand in its AM offering with a number of new hardware launches including the Arcam EBM Spectra L and Concept Laser M2 Series 5 machines launched towards the end of last year, and two new AM campuses in Germany and Sweden.
With regards to what the AM write off could mean for the business, a financial expert told TCT: “Goodwill is the excess of what you pay for a business over the assets, what this statement looks like is that GE no longer believe those acquisitions are going to be as profitable as predicted. Generally, an impairment of goodwill is not great as it looks like you have overpaid, however, sometimes circumstances like a global pandemic are out of your control. So, any airline acquisitions, holiday firm acquisitions etc., would all be expected to record impairments now, so that is industry consistent and just symptomatic of the pandemic."
The aerospace industry, one of AM biggest target markets, has been hard hit by the pandemic with reduced travel and quarantine restrictions taking their toll on the airline sector. Last month, GE announced 769 job losses at several plants across the UK which Unite, Britain and Ireland’s largest union, described as a "failure" from the UK Government "to put forward a ‘survive, rebuild and recover’ strategy for UK aerospace." However, Unite national officer for aerospace Rhys McCarthy did offer that these "job cuts are not coming from failing companies," adding that pre-COVID, "they were thriving."
GE Aviation has reported that orders of 3.7 billion USD were down 56%. Sales of its LEAP engine, which features perhaps the most well-known example of AM in production, were down 259 from last year (for LEAP-1A and -1B models) which contributed to revenues of 4.4 billion USD, down 44% reported and organically.
Speaking about GE’s overall results in a press release, GE Chairman and CEO H. Lawrence Culp, Jr. said: “We had a very challenging second quarter that we met head-on, executing well operationally while we took actions to further de-risk our company. Our earnings performance was impacted by the ongoing impact of COVID-19 on our businesses, but Industrial free cash flow was better than our expectations and previously communicated range. We made faster progress on elements within our control, including our targeted cost and cash preservation actions.”
UPDATE: Commenting on how the news relates to GE Additive, a GE spokesperson told TCT: "The slowdown in the metal additive machine market in 2019 impacted us and other companies in the industry. In addition, COVID-19 is expected to significantly delay spend-levels in the key industries that GE Additive serves. GE Additive remains an attractive value proposition and an important part of GE technology. GE continues to invest and actively manage the business in line with end market investment trends."
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