Ford Motor Company today posted a Q2 pre-tax profit of $2.6 billion, an increase of $44 million compared with a year ago. After-tax earnings per share of were 40 cents, beating analysts’ estimates of $0.36. Excluding special items, it was Ford’s 20th consecutive profitable quarter. Ford’s second quarter operating effective tax rate was 44%. Ford continues to expect its full-year operating effective tax rate to be about 35%, assuming retroactive extension of U.S. research credit legislation in the fourth quarter. Ford’s Q3 rate is expected to be about equal to Q2.
It was a solid quarter particularly when compared with Q1 results of a pre-tax profit of $1.4 billion, a decrease of $765 million compared Q1 of 2013. It’s possible that Ford moved charges into Q1 to pave the way for the CEO change that took place on 1 July with Mark Field replacing Alan Mulally. (Ford Motor Q1 Pre-Tax Profit $1.4 Billion. Net $989 Million. Both Down)
North America, Asia Pacific, Middle East & Africa, Europe and Ford Credit were all profitable and improved compared with a year ago. South America remains bedeviled. There was a record quarterly profit in North America; a record second quarter profit in Asia Pacific; and the first quarterly profit in Europe in three years. Ford Motor sold 1.661 million vehicles (-17,000 or a decline of 1% year-over-year) producing a net income of $1.3 Billion.
Net income included pre-tax special item charges of $481 million. These include 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 Focus. Also included in special item charges are separation-related actions, primarily in Europe.
Automotive operating-related cash flow of $2.6 billion, the 17th consecutive quarter of positive performance. Ford ended second quarter with Automotive gross cash of $25.8 billion, exceeding debt by $10.4 billion. Operating margin was 6.6%, an increase of 0.2 percentage points from a year ago. Automotive pre-tax profit was $2.2 billion, a $66 million improvement, more than explained by lower costs and favorable market factors, partially offset by adverse exchange driven by South America.
Ford is currently implementing a previously announced share repurchase program for up to 116 million shares, or almost $2 billion, to offset an up to 3% dilutive effect of potential convertible debt conversions and stock-based compensation.
Ford confirmed its 2014 pre-tax profit guidance of $7 billion to $8 billion, noting what for Ford is an unprecedented number of global product launches. Ford expects the payoff from its investments this year will be a strong product lineup with higher volumes, revenue and margins in 2015.