And they account for 42 per cent of the workforce and 40 per cent of the Emirate’s GDPNovember 24, 2015 4:32
GE sees resource-rich Latin America, MidEast key to growth
General Electric Co expects sales to rise 20 percent to 25 percent this year in Australia and other resource-rich countries from Latin America to the Middle East, as they are big buyers of its heavy industrial equipment.
March 8, 2012 3:45 by Reuters
After spending the last two years revamping its broad lineup to focus more closely on energy-related technologies, GE is now building up its business in those regions, which it expects to outperform not only its U.S. home market but also Asia.
“We think that within the next 10 years, the growth markets will contribute 50 percent of the company’s revenue,” up from about 37 percent currently, Vice Chairman John Rice, who runs the company’s foreign operations, said at an investor briefing in Rio de Janeiro on Wednesday.
The largest U.S. conglomerate forecast 10 percent to 15 percent 2012 revenue growth in Asia and expects sales in developed countries, including the slowly recovering United States and struggling Western Europe, to be flat to up 5 percent.
GE convened investors in Brazil to underline Latin America’s importance for the company — it generates more revenue there than in China and India combined, Rice said. The company needs to cast a wide geographic net because orders for its products can come in fits and starts.
“You can never draw a conclusion about these markets. Things like airlines don’t buy just one engine, they buy 100,” and a big order can be followed by a fallow period, Rice said.
GE is not alone in focusing its attention outside the United States. U.S. diversified manufacturer Honeywell International Inc told investors on Wednesday that it expects sales in high-growth countries to rise to about $10 billion, or 25 percent of the forecast corporate total, by 2014.
Rice also confirmed GE’s target for overall corporate earnings to rise at a double-digit percentage rate this year.
The resource-rich countries, which produce large amounts of oil, natural gas, metals and other commodities, are a major focus for GE since they need its electric turbines, oil production gear and other heavy equipment.
In Latin America, for instance, GE sees a chance to sell $1 billion of equipment into Peru’s Kuntur pipeline project and $5 billion into regional biofuel projects, executives said.
The world’s largest maker of jet engines and electric turbines is building its management presence in these markets.
GE moved Rice to Hong Kong last year to have a top officer in Asian time zones. It has named regional chief executives for five key regions: Latin America; China; Australia and New Zealand; the Middle East, North Africa and Turkey; and sub-Saharan Africa. Each of those executives has responsibility for all of GE’s varied operations — from turbines to railroad locomotives to medical equipment — in his respective region.
The broader focus reflects the realization that China, which over the past decade was a key growth market for GE and industrial peers including Caterpillar Inc and 3M , is unlikely to continue at its torrid pace.
“Certainly China is taking a much more considered view of their future,” said Peter Klein, senior portfolio manager of Cleveland’s Fifth Third Asset Management, which holds GE shares. “I don’t think the opportunities are any less, but the kind of advances you can get from a growth perspective may be a little bit better elsewhere.”
On Monday, Beijing cut its gross domestic product growth forecast to 7.5 percent from the 8 percent rate it had targeted for the last eight years.
“Do I think that China will return rapidly to 10 percent, 11 percent growth? No. But I don’t think that matters,” for GE, Rice said, adding that he thought China’s government would continue to spend on infrastructure projects even with the economy growing more slowly.
“As GDP rates get revised, there is still tremendous pressure on governments and companies to build out the infrastructure,” Rice said, “and we believe that’s the last thing that will get cut.”
About 56 percent of GE’s 301,000 employees work outside the United States, according to filings with the U.S. Securities and Exchange Commission. The company generated 53 percent of its $147.3 billion in 2011 sales outside the United States.
GE competes with some of the world’s largest companies, including Germany’s Siemens AG, French industrial group Alstom SA and Swiss engineers ABB Ltd.
Rice said the Fairfield, Connecticut-based company’s buildup in emerging nations was critical to GE’s long-term growth prospects, but he acknowledged its risks.
“Is it dangerous? Do you have to worry about security? Do you have to worry about corruption? Do you have to worry about government overthrow? Yeah, we’re not naive about it,” he said. “The day is over when you can fly in, book an order, leave and expect to grow your business.”