The goal is 18% by the end of 2018, Flannery said during a GE Healthcare investor presentation March 11. The imaging and healthcare IT business expects to post operating margins of 16.7% this year, up from 16.3% last year.
Flannery said the gains will come from by tripling GE Healthcare’s cost-cutting measures, new products and an increased contribution from digital services revenue. The division isn’t planning to sell of any businesses as part of the margin push, he said.
“We don’t feel the need to do a major acquisition or divestiture and I don’t want the business distracted from growing earnings,” Flannery said. “We have 5 years-plus of not growing earnings. We’re not going to be a party to that anymore.”
GE Healthcare posted profits of $938 million on sales of $4.97 billion during the 3 months ended Dec. 31, 2015, for a bottom-line slide of -8.0% on a -3.1% sales decline compared with Q4 2014. Full-year profits were $2.88 billion for the healthcare business on sales of $17.64 billion, representing declines of -5.4% and -3.6%, respectively, compared with 2014.
Flannery cited GE’s ultrasound equipment business as an example the rest of the unit will follow. The ultrasound business faced 10% annual price declines but increased margins by cutting costs and launching new, less-expensive products.
Developed markets accounted for about 75% of all sales last year, the company said. In emerging markets, from 2009 to 2015, sales grew 90% in Southeast Asia and 80% each in the Middle East & Africa and Latin America. China posted top-line growth of 70%; India grew 35% during that time, the company said.
Material from Reuters was used in this report.