GE Vernova ($GEV (-8,19%) ) recently held its first conference at the 42nd Barclays Industrial Select since the spin-off. The year 2024 served as a foundation to go on the offensive after the spin-off on April 2. The company has a strong balance sheet with over USD 8 billion in cash at the end of the year. This supported the first capital allocation program with a dividend and a share buyback program of USD 6 billion. In addition, the company's long-term profitability was strengthened, as evidenced by a $6 billion increase in backlog margins over previous years.
The individual divisions were then discussed:
Gas: At least 20 gigawatts of new orders per year are expected to be received. In the first quarter, this is expected to be at least 5 gigawatts. There is a healthy demand cycle for services. In North America and the Middle East, the volume has even doubled, which is due to increased investment in the installed gas base.
Wind: The end market remains weak and low order intake for new onshore wind turbines is expected in the short term. However, there are opportunities in repowering and some international markets may offset the weakness in North America. There is progress in the maintenance of the installed wind turbine base. The number of crews and cranes for maintenance has more than doubled compared to the previous year. In addition, the quality of the rotor blades is being improved by subjecting every rotor blade coming out of the factory to a crawler inspection with visual inspections and AI.
Electrification: The fastest growing segment, which has increased its order backlog from USD 6 billion to USD 20 billion in the last two years. Annual backlog growth in 2025 is expected to be similar to the average of 2023 and 2024. Significant growth can be achieved through lean methods and more efficient factory management. For example, an enclosure plant in Pennsylvania will increase its sales by almost 1 billion US dollars from 2024 to 2026, with an investment of only 20 million US dollars. The company is sticking to the forecast it made in December and is looking ahead to 2025 and beyond with confidence.
Less than 5% of material purchases come from China, Mexico and Canada and are imported into the US. The company is building its capabilities to manage its supply chain through a period of volatility. Currently, there is mid-range load growth, at least in the US, from data centers. Of the orders in 2024, 25 were for HA gas turbines (high-efficiency baseload gas turbines), 20 were for F-class gas turbines (choice for peaking applications) and about 45 were for aeroderivative units. The need for F-class and derivatives is due to the more vulnerable system caused by intermittent energy sources. The company sees this as just the beginning and expects further growth from its customer base.
GE Vernova has set itself medium to high margin targets in the low double-digit range for the Power and Electrification segments for 2028. The company is confident of increasing its margins over time.
The company also currently has $8 billion of cash on hand. The company will conduct a share buyback of USD 6 billion over several years. Organic growth is a priority, but acquisitions to increase the resilience of the supply chain are being considered.
