Ford has announced Q1 2017 pretax profit down US$1.6bn year on year to $2.2bn on revenue up $1.4bn to $39.1bn.
Net profit was down $0.9bn to $1.6bn and the auto segment operating margin slipped 4.4 percentage points (pp) to 5.4%.
The automaker said the lower profits were the result of higher costs, lower vehicle unit volume and and unfavourable currency exchange rates.
The higher costs were due to warranty, investments in new products and “emerging opportunities for future growth”, plus rising commodity costs.
However, average vehicle transaction prices in the US were up $1,971 year on year, nearly four times more than the industry average of $506, thanks to good sales of profitable F-150 and Super Duty trucks and Lincoln models.
Good automotive results were due mainly to the North America region though Europe, reflecting restructuring pain over the last few years, and Asia Pacific were also profitable. Ford Credit pre-tax profit was $481m.
“Ford’s balance sheet remains strong – ready and able to support our plans for growth and to protect against adverse changes in the business cycle,” said CFO Bob Shanks in a statement.
“We’re also pleased to have rewarded shareholders with distributions in the quarter of $800m, including a supplemental dividend.”
In the automotive segment, first quarter wholesale unit volume was down 17,000 vehicles to just over 1.7m for an operating margin off 4.4pp to 5.4%. Revenue rose $1.3bn to $36.5bn and market share 0.3pp to 7.1%.
Though unit sales fell in North America, a better mix boosted revenue $0.1bn to $24bn but operating margin fell 4.6pp to 8.3% and pretax profit $1.1bn to $2bn.
“All key metrics improved for the second consecutive quarter,” Ford said of South America where unit sales improved 7,000 to 70,000, revenue was up $0.3bn to $1.1bn and operating margin rose 7.9pp to a still-negative 22.25%. The pre-tax loss fell $12m to $244m.
The once long-struggling European region saw double-digit growth and continued profitability in the quarter. Though unit wholesales were up 50,000 to 449,000 for revenue up $0.7bn to $7.6bn, operating margin fell 4pp to 2.3% and pretax profit $258m to $176m. For full year 2017, Ford continues to expect Europe to remain profitable, although below 2016 levels, due to weaker sterling, higher costs associated with the launch of a redesigned Fiesta and EcoSport, and continued investment for future growth.
A pretax loss of $80m was booked for Middle East and Africa due, Ford said, to “unfavourable dealer stock changes, lower market share and lower industry volume in the Middle East” though it “continues to expect results in the region to improve compared to 2016 due to lower cost and favourable exchange, with lower volume a partial offset”.
Asia Pacific pretax profit fell $96m to $124m. Ford said: “Results in China drove the year over year changes in key metrics, except for revenue.” Lower volume was due to sales being pulled ahead to Q4 2016 as a tax incentive was set to expire. Results in all major markets outside of China improved. For 2017 the automaker “continues to expect profits to improve from 2016 due to higher volume. Net pricing will be lower due to negative industry pricing in China, while exchange is expected to be unfavorable due to weaker RMB.”
The automaker said it continues to expect total company adjusted pre-tax profit to be about US$9bn.