Ford Motor Posts Q2 Pre-Tax Profit of $2.6 Billion

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.

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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