GE’s Mining Business To Drive Long-Term Growth For Its Transportation Division

by Trefis Team
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General Electric
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The global mining equipment market size currently exceeds $60 billion. [1] And, it is expected to show strong and steady growth over the long term backed by increasing urbanization globally and growing demand for energy from emerging economies. To take advantage of this growth, General Electric (NYSE:GE) acquired two mining companies, Australia-based Industrea Limited and Virginia-based Fairchild International, earlier this year. [2] Building on these acquisitions, GE has launched GE Mining with a compelling mining product portfolio that offers power solutions, water management, and productivity solutions at mining sites. The newly created mining business of the company is part of the larger GE Transportation business division and is expected to drive the top-line growth for the division over the coming years.

We currently have a stock price estimate of $21.77 for GE, marginally lower than its current market price.

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GE Mining Business

GE Mining’s product offerings include power solutions, water management and productivity solutions. The company says that its Durathon battery systems, integral to power solutions, offer several advantages compared to traditional diesel-powered generator sets. The battery system reduces several issues associated with heat and emission particulates and helps save on ventilation costs at underground mines.

The water solutions technology recovers up to 98% of water used and reduces liquid brine seven-fold compared to conventional technologies. And its productivity solutions enable mine operators to better gauge equipment health and thereby reduce downtime from machine breakdown. [1] GE Mining is based out of Brisbane, Australia.

On the business front, though the company has not provided a revenue target for the newly formed unit, it anticipates sales from the unit to exceed $5 billion in a few years. [1] This compares to total sales of $4.9 billion at GE Transportation in 2011. [3] Hence, we expect GE Mining to drive the top-line growth for GE Transportation over the coming years and thereby create significant investor value.

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Notes:
  1. GE Launches New Global Mining Business Unit; GE Mining Technology and Software Boosts Efficiency, Lowers Emissions, September 24 2012, www.gereports.com [] [] []
  2. GE Taps Mining Momentum with Two Proposed Acquisitions, May 16 2012, www.gereports.com []
  3. 2011 10-K, www.ge.com []
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