Ford profit edges up on lower tax rate
Ford’s second-quarter profit margin fell to 5.9 percent from 7.7 percent in the same period a year ago. Photo credit: REUTERS
DETROIT — Ford Motor Co. reported second-quarter net income of $ 2.04 billion, up 3.7 percent from the same period a year ago because of a favorable tax rate.
But pre-tax profits fell 16 percent to $ 2.51 billion because of higher steel costs, an unfavorable foreign-currency exchange rate and other factors. Revenue rose 0.9 percent to $ 39.85 billion.
Ford’s tax rate was only 10 percent in the quarter, less than a third of the 32 percent rate it paid in all of 2016.
The automaker took a $ 248 million charge in the quarter to end production of the Focus compact car in South America, a decision made public for the first time Wednesday. A Ford spokesman declined to say when production would end. The move follows news that Ford will end Focus output in North America next year and begin importing the car from China in 2019.
Ford’s profits also were hurt by a $ 142 million charge for a June recall of 402,462 Transit vans in North America for driveshaft separations.
“This quarter shows the underlying health of our company with strong products like F-Series and commercial vehicles around the world, but we have opportunity to deliver even more,” CEO Jim Hackett said in a statement. “The entire team is focused on improving the fitness of the business and smartly deploying our capital to improve both the top and bottom lines in the quarters ahead.”
Hackett: “The entire team is focused on improving the fitness of the business and smartly deploying our capital to improve both the top and bottom lines in the quarters ahead.” Photo credit: REUTERS
The second-quarter results offer the first snapshot of the company’s finances and operations inherited by Hackett, a former Ford director who headed the automaker’s mobility efforts before abruptly replacing Mark Fields as CEO in May.
Ford’s second-quarter profit margin of 5.9 percent was down from 7.7 percent a year ago. Adjusted earnings were equal to 56 cents per share, up 4 cents. That topped analysts’ estimates of 43 cents per share.
Nearly all of Ford’s profits were generated in North America. It generated a $ 2.2 billion pre-tax profit in the region, down 19 percent from the same time a year ago due to lower fleet volume.
Ford earned $ 143 million in the Asia Pacific region, versus a small loss a year ago, driven by higher volumes in China.
Ford also was profitable in Europe, though its $ 88 million pre-tax profit there was 81 percent lower than a year ago. It was Ford’s ninth consecutive quarterly profit in Europe, but results were hampered by Great Britain’s decision to leave the European Union and lower volume as Ford launched a redesigned Fiesta in the market.
Ford lost $ 53 million in the Middle East and Africa and $ 185 million in South America. For the full year, Ford said it expects to lose less money in South America than in 2016.
At Ford Credit, second-quarter pre-tax profit jumped 55 percent to $ 619 million. It was the credit arm’s best quarter since 2011.
Ford increased its earnings guidance, although it has changed how the figure is reported. It previously said it expected to generate pre-tax profits of $ 9 billion in 2017, down from $ 10.4 billion in 2016 as it invests in “emerging opportunities” such as autonomous and electric vehicles. That translated to an adjusted earnings per share of $ 1.58 per share.
Ford now says it will end the year with adjusted earnings per share of $ 1.65 to $ 1.85, reflecting an improved full-year tax rate that it expects will be 15 percent. The automaker would not offer a pre-tax profit prediction, although CFO Bob Shanks said the new guidance would translate to “a little bit less” than its previous forecast of $ 9 billion.
Ford raised its guidance for Ford Credit to better than the $ 1.5 billion pre-tax profit it had projected, although it did not provide specifics.
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