H. Lawrence Culp
Chairman & Chief Executive Officer at General Electric
Carolina, thank you. Starting with Aerospace, I'm six months in leading this business and my conviction is even higher today that we have a premier franchise with highly differentiated product and technology positions and leading positions in attractive commercial and military sectors. Entering 2022, our priority was delivering on the significant growth across both engines and services where stability and predictability are critically important for our customers. This starts with the right team. We have a balance of unparalleled experience and fresh perspective with nearly half our leaders new to their roles this year. We're also driving two major operational changes. First is accelerating our progress with Lean to improve operating rigor and delivery. Take supply chain where we've seen real improvements with more to come. Our team in Terre Haute produces lead turbine center frames and started '22 with about 50 pieces delinquent.
Working through multiple kaizens implementing flow standard work and daily management, the team's Lean actions increased output over 20% and improved productivity by about 10% and today they are on schedule. With our 2023 demand, we'll need to continue to use Lean in this way to deliver for our customers. The second is decentralization. For example in our Commercial Engines business, we're increasingly running our product lines as their own P&Ls in line with how our customers work with us. More cross functional collaboration in real time closer to the customer helps make us better. Turning to the quarter, both orders and revenue were up over 20%. Equipment orders were robust now with almost 10,000 LEAP engines in backlog. Commercial Services and equipment revenue grew about 30% and Military revenue was up about 20% and services internal shop visits were up 25% and external part sales were up more than 20%. In equipment, commercial units were up nearly 30% with LEAP units up almost 50%.
Looking sequentially, both internal shop visits and commercial units were about flat, but Military units were up 10%. While material availability continues to be a challenge to our output across engines and services, we're using our Lean tools to help accelerate sequential improvement, a key for us this year. Fourth quarter margins were above 18%, slightly better than we expected although down year-over-year. Higher volume and price were more than offset by negative mix driven by increased commercial equipment shipments, continued investment to support the business growth, and other cost pressures. While still net price cost positive, we expect inflation will continue to be challenging in 2023. For the year, revenue was up 23% driven by commercial sales with internal shop visits up over 20%. Profitability and cash were solid. Margins were 18.3%, up 440 basis points year-over-year.
Services growth and positive price cost more than offset the impact of increased investments and negative engine mix from higher LEAP deliveries. Free cash flow of $4.9 billion was driven by earnings and working capital. As we shared last quarter, total in-year AD&A flow came in close to zero versus last year $0.5 billion of pressure. Looking ahead, today GE and CFM departures are close to 90% of '19 levels and we expect to be back to '19 levels later this year. In '23, internal shop visits are expected to grow about 20% and external spare part sales are expected to increase. With Commercial Engines growing at about 20% and services at high teens to about 20% plus Military growing at a high single-digit rate, we expect total Aerospace revenue to be in the mid-to-high teens and we expect LEAP engine deliveries to grow about 50% in '23. We also expect to deliver profit of $5.3 billion to $5.7 billion and higher free cash flow.
Aligned to current airframer aircraft delivery schedules, AD&A is expected to be about $0.5 billion outflow in 2023. We're laser focused on supporting our airframers, airlines, and lessors as they ramp post pandemic. Today, that means providing stability and predictability for our customers, keeping our current fleet flying, and growing our new fleet; all the while continuing to invest in technologies that will define the future of flights. Notably we're encouraged by the momentum at Military with our next generation technology including the XA100 engine for the F-35. The XA100 offers cutting-edge capabilities needed to ensure continued US air superiority. The Adaptive Engine Transition Program received a strong show of support recently from nearly 50 Bipartisan Members of Congress who voted in support of continuing the program, which includes our engine with $286 million of funding included in the 2023 Omnibus Appropriations Bill. Overall, GE Aerospace is an exceptional franchise with a bright future as a standalone industry leader.
Turning to the GE Vernova portfolio. Power delivered a solid performance this year and we're making real progress running a similar strategy at Renewables. While the demand dropped due to the PTC lapse significantly impacted our Renewables results in 2022, the Inflation Reduction Act is a real game-changer for us and the industry going forward. In fact we began to see a rebound in demand this quarter with Renewables orders up 7%. Onshore orders in North America more than doubled, a very encouraging sign. But unlocking the full potential of the IRA will hinge on how quickly the administration moves through implementation. Meanwhile, lower volumes and inflationary pressures continue to weigh on our performance. Fourth quarter revenue was down 13% due to Onshore and margins contracted as inflation and lower volumes offset pricing and productivity gains. Full-year free cash flow declined over $0.5 billion due to lower earnings.
So while we await clarity on the IRA Rules, Scott and the team are controlling the controllable taking action and we saw progress in that regard this quarter. Grid, a business that lost close to $400 million in 2021, was profitable for the first quarter since 2018 reflecting our restructuring and selectivity efforts. Orders also grew significantly. At Onshore, we're executing restructuring with our headcount decreasing almost 20% sequentially, which will deliver savings in 2023. Our strategic sourcing actions at Onshore and our focus on reducing product variance will improve product cost despite continued inflationary pressures. Across the businesses, orders and sales pricing continue to improve with our selectivity strategy yielding a more profitable backlog and pipeline. Service orders and revenues, excluding repower, grew. There's certainly more work to do and the next six months will remain challenging, but we're acting with urgency.
In 2023 we expect mid single-digit growth, significantly better profit, and flat to improving free cash flow. Taking it by the businesses. Onshore, we expect more than 50% orders growth in North America this year and based on the orders we have in hand, we're confident of delivering over 2,000 units globally with North American volume more than doubling in the second half versus the first half of the year. We also expect a significant step-up in profit driven by lower warranty and related reserves, better price, and restructuring benefits. With this significant orders growth comes roughly $3 billion to $4 billion of cash down payments this year. This includes $0.5 billion of cash linked to large tech selects we've won, which we expect to convert to orders later this year. These are strong customer commitments, but given the project size and complexity, timing could shift somewhat across quarters.
In Offshore, we expect to more than double revenue from about $0.5 billion in 2022. However, our margins on the first tranche of Haliade-X projects will be challenging between typical new product margins and inflation resulting in rising losses. Associated with the delivery growth and limited down payments, we also expect cash will be significantly pressured in 2023 in Offshore, mostly a timing dynamic. And at Grid, given our robust orders growth, we expect continued growth. The actions we've taken on price are expected to offset inflation pressures and we continue to make progress, including our small -- our smaller cost structure and productivity. Taken together, this will enable Grid to deliver a modestly profitable year in 2023. Overall, I'm confident we're seeing operating improvements throughout the year in Renewables and key external catalysts like the IRA will help improve our longer-term economic profile here.
Moving to Power. We've significantly improved Power as demonstrated by our continued profit and cash growth. We're well positioned for continued services growth with our expanded HA fleet. To-date we've now shipped 110 HAs with roughly 80 units COD providing a reliable source of cash growth in the future as our highest utilization assets in the fleet. Looking at the quarter, Power demand remained robust. Orders grew in all businesses and revenue was up double digits largely driven by continued aero-derivative momentum at Gas Power. Services were also solid with orders and revenue up again driven by gas transactional services. Margins expanded over 700 basis points driven by significant Gas volume, favorable price cost, and productivity gains. Similar to Aerospace, we expect inflation will remain challenging through 2023.
Moving to the full year. Orders were up double digits, but importantly we're not taking our eye off selectivity with disciplined underwriting. In line with our outlook: revenue was up low single digits led by services, margins expanded 300 basis points enabling Power to achieve high single-digit margin for the year, and our free cash flow improved significantly across both Gas and Steam. At Gas, service billings were strong as fleet utilization grew low single digits. Looking to 2023 for Power, we expect low single-digit revenue growth driven by Gas Power Services. Equipment revenue will grow as we deliver more HAs despite the new bill wind-down at team and we anticipate [Technical Issues] year-over-year. At Gas, both equipment and services volume as well as productivity gains to price should help offset rising inflation pressure. We expect lower free cash flow year-over-year, continued earnings growth, and strong services collections but offset by disbursement. So, we expect free cash flow conversion to remain solid.
Stepping back, our existing technologies in the GE Vernova portfolio will play an important role in the energy transition as the strategic imperative to electrify and decarbonize the world is a challenge that these businesses with their vast installed bases were made to meet. Let's turn now to the overall GE outlook for 2023. We're expecting organic revenue growth in the high single-digit range; $1.60 to $2 for adjusted EPS, which includes about $4.2 billion to $4.8 billion of adjusted profit; and a range of $3.4 billion to $4.2 billion for free cash flow. Underpinning this outlook is a higher services concentration in our portfolio as well as our confidence in the strength of GE Aerospace as the worldwide commercial aviation industry, airlines and airframers alike, continue this post-pandemic recovery. We also anticipate Military revenue growth thus yielding significant profit growth for GE Aerospace in '23.
For GE Vernova, we expect low to mid single-digit growth and profit of negative $600 million to negative $200 million, including improvement at both businesses. On cash, we expect flat to slight improvement. This is driven largely by better profitability and planned down payments in Onshore where timing could shift across quarters with some offset from Offshore increasing deliveries. Across GE, we expect continued operational improvements to deliver higher earnings and improved working capital management. In turn, this will help us drive higher free cash flow for GE in '23. We're looking forward to sharing more during our March 9 Investor Conference at GE Aerospace in Cincinnati, by then hopefully home of the Super Bowl Champion Bengals, where you'll hear more detail from our leadership teams about both GE Aerospace and GE Vernova. Please come see us.
To close on Slide 8, I hope you see what I see. Strong results, a simpler story, and an exciting future. At GE Aerospace, continuous Improvement is our mantra and our results reflect our team, our technology, and our portfolio's unique positioning as the industry's largest and youngest fleet. At GE Vernova, Power is delivering solid earnings and cash while we're setting up Renewables to drive longer-term profitable growth. We're moving forward with our plans to launch two independent investment grade industry leaders that are well positioned to create long-term growth as we shape the future of flight and lead the energy transition. And I'm confident that we'll unlock greater value for our customers and our shareholders in the year ahead.
Now we're ready for questions. Steve?
