Ford reported Q2 2013 pre-tax profits of US$2.6bn after its North America region, set records for both Q2 and H1 results and Asia Pacific Africa set a quarterly record. South America returned to profitability but Europe floundered with a rise in H1 losses though the Q2 loss fell and the full year loss forecast was lowered.
Q2 pre-tax profit was up $726m due to what the automaker called “outstanding performance in North America, recovery in South America from the exchange-driven loss in the first quarter, very good progress in Europe in continuing to deliver the company’s transformation plan and the best-ever profit in Asia Pacific Africa”.
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Net income rose $193m to $1.2bn.
Second quarter wholesale volume and revenue increased by 16% and 15%, respectively.
First half volume and revenue both increased 13%.
North America set an H1 earnings record with a pre-tax profit of $4.7bn, up $628m with operating margin 10.7%, about the same as last year. Wholesale volume and revenue increased about 16%.
South America’s pre-tax profit in the second quarter was $146m higher. Wholesale volume and revenue increased from a year ago by about 24% and 28%.
However, there was a first half 2013 loss of $67m due mainly to the devaluation of the Venezuelan bolivar in the first quarter. Wholesale volume and revenue were both higher than last year.
The automaker expects break even for the full year “in an environment that remains challenging across the region”.
Europe’s second quarter pre-tax loss of $348m was $56m better than a year ago and $114m better than the first quarter of 2013.
“Europe is making very good progress in executing our transformation plan, which is focused on product, brand and cost,” said CFO Bob Shanks. “Our strong cadence of new product introductions, matching supply with real demand and focusing more on retail customers will enable us to meet our goal of being profitable in Europe by mid-decade.”
In the second quarter, wholesale volume and revenue both improved about 8%. Operating margin was a negative 4.6% — improved from a year ago.
Europe’s first half loss was $810m, and operating margin was negative 5.7%, both worse than a year ago, due to $291m of restructuring costs.
The automaker is now focusing on retail sales and reducing reliance on short cycle rental and dealer self-registration sales. Dealer stock days supply of new vehicles at the end of the second quarter were reduced and stocks of dealer self-registered vehicles were lower by about two-thirds year on year.
Manufacturing ‘footprint’ is also reducing as planned. The Southampton Transit assembly plant and Dagenham stamping and tooling operations will close at the end of this week and the company has completed the consultation process with unions at the Genk plant which is scheduled to close at the end of 2014.
Special items in the second quarter included $442m for worldwide separation-related actions, of which $419m was related to separation costs for personnel located at the Genk and UK facilities scheduled to close.
The total of these separation costs is estimated at about $1.2bn, all of which the company expects to incur by the end of 2014. It expects to book about $800m in 2013, including the $419m in the second quarter.
The full year 2013 pre-tax loss for Europe now is expected to be about the same as last year, or about $1.8bn, compared with earlier guidance of about $2bn.
“While the outlook for the business environment in Europe remains uncertain, data trends suggest that economic and industry conditions may have begun to stabilise,” the automaker said.
The Asia Pacific Africa region reported a record quarterly result in the second quarter with pre-tax profits of $177m, up $243m. Operating margin of 5.8% was up 8.7%.
Wholesale volume increased 27% and revenue grew 35%.
The region’s first half profit was $183m with an operating margin of 3.2% — both higher than a year ago. Wholesale volume and revenue also increased.
The company now expects Asia Pacific Africa to be profitable for the full year.
In the second quarter, Ford produced about 1.7m units, or 218,000 more than in the second quarter of 2012, reflecting higher volumes in all regions. Q3 production will be about 1.6m units, up 195,000 units from a year ago.
