Ford has boosted second quarter pre-tax operating profit US$44m to $2.6bn and net income $78m to $1.3bn as wholesale volume and company revenue slipped 1%. And it’s finally back in pre-tax profit in Europe for the first quarter in three years.
The automaker said all automotive business units were profitable and improved year on year except for South America. The first quarterly profit in three years was finally booked in Europe.
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Full-year pre-tax profit guidance of $7bn to $8bn was confirmed.
Net income pre-tax special items of $481m included the impairment of Ford’s equity investment in the Ford Sollers joint venture in Russia, reflecting the present outlook for the business, including a weaker ruble, lower industry volume and industry segmentation changes that negatively impact sales of the Focus. Employee severance costs, primarily in Europe, also contributed.
Automotive second quarter wholesale volume decreased 1% and revenue by 2% due to lower market share in all regions except Asia Pacific.
Operating margin was 6.6%, an increase of 0.2%. Automotive pre-tax profit was $2.2bn, a $66m improvement due to lower costs and favourable market factors, partially offset by adverse exchange led by South America.
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By GlobalDataNorth America reported a record pre-tax profit of $2.4bn in the second quarter, an increase of $119m from last year.
Wholesale volume and revenue declined 5% and 3%, respectively.
South America reported a pre-tax loss of $295m in the second quarter, a $446m deterioration from last year.
Wholesale volume and revenue decreased by 22% and 30% due to an 800,000-unit decline from last year’s SAAR of 6.1m units. This includes the impact of the weakening economy in Brazil, import restrictions in Argentina and lower production in Venezuela resulting from limited availability of US dollars.
Ford now expects the region to incur a larger loss than it previously guided despite the launch of the new Ka small car which should mean a break-even second half.
The really good news is the return to profit in Europe with a second quarter pre-tax $14m, a $320m improvement due to lower costs and favorable exchange, though the company still lost $180m in the first half.
Restructuring costs were lower than a year ago, primarily due to a reserve release this quarter associated with the Cologne investment agreement and non-recurrence of a facility write-off in Genk, Belgium last year.
Wholesale volume was flat while revenue improved 10%. Europe 20’s SAAR was 14.4m units, up 700,000 units from a year ago though there were declines in Russia and Turkey.
Ford’s full-year guidance for Europe remains unchanged, with the region expected to improve pre-tax results compared with 2013. But, consistent with the normal seasonality of sales and production, Ford expects Europe’s second half loss to be higher than the first half loss of $180m.
Middle East & Africa reported a profit of $23m for the second quarter, a $10m improvement from a year ago. In the second quarter, wholesale volume and revenue declined.
Full-year guidance remains unchanged with the region expected to be about breakeven.
Asia Pacific reported a second quarter pre-tax profit of $159m, an improvement of $29m. Wholesale volume was up 21% from a year ago, and net revenue, which excludes the company’s China joint ventures, grew 9%.
Wholesale volume in China increased 26%.
For the full year, Ford continues to expect Asia Pacific to earn a higher pre-tax profit than a year ago.
In the second quarter, total company production was about 1.7m units, 24,000 units higher but 8,000 units lower than Ford’s most recent guidance.
The company expects third quarter production to be about 1.5m units, down 12,000 units.
Ford Credit’s second quarter pre-tax profit of $434m was $20m lower than a year ago due to a higher level of insurance losses from storm damage to dealer inventory in the quarter.
Ford Credit full year pre-tax profit is forecast higher than 2013, improved from the previous guidance of about equal to or higher than 2013.
