Ford surprises with lower 2Q profit on trouble in US, China

Ford's net income fell 9% to $2bn in the second quarter as the company's China sales weakened and the company failed to match better results from past year.

Ford had previously said that its total pre-tax profit, earnings per share, automotive revenue, and automotive operating margin would all be equal to or higher than its impressive 2015 full-year results.

However, it added, the "company now sees risks challenging achieving guidance" and the "entire Ford team" is "working to mitigate the risks". Pretax benefits in Europe practically tripled to $467 million regardless of a hit from Britain's vote to leave the European Union.

Ford fell 9.5 percent to $12.52 at 10:28 a.m.

Ford operations in Europe delivered $467 million pre-tax profit - almost triple year ago results - for its best ever second quarter. "Although Facebook numbers were really good - great in fact", Meckler said.

There were other storm clouds.

"We're expecting to have a weaker third-quarter primarily due to the costs of launching the Super Duty (pickup truck)." said Shanks, referring to Ford's first redesign of its heavy-duty pickup truck in 19 years, including converting to an all-aluminum body like its smaller F-150 counterpart. But executives said the company was at risk of falling short of its full-year targets and was undertaking a series of "profit improvement actions", including cuts to manufacturing costs, without being specific. Ford is one of the top-selling brands in the United Kingdom and furthermore, has engine and transmission plants there.

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The bad news came from North America and Asia. "We think the second half will be lower than the first half", said Bob Shanks, Ford chief financial officer.

Ford reported net income of $1.97 billion, or $0.49 per diluted share, versus $2.16 billion or $0.54 per share a year ago. In North America, revenue grew 2 percent to US$23.8 billion for the quarter.

"We're starting to see a maturation of the economic cycle", Shanks told reporters, according to Automotive News.

On Wall Street, stocks initially were dragged lower by Ford Motor (F.N), which posted poor second-quarter profit, as the USA market was range-bound for a second week. Shanks said Ford sold fewer commercial vehicles in China and spent heavily on engineering and warranty costs. The weaker yuan also impacted sales of its luxury Lincoln brand, the company said.

Further, Ford expects to report higher loss from South America compared to a loss of $832 million in 2015.

According to the earnings announcement, profit decreased 4% to $0.52 per share compared with a profit of %0.54 per share in the same quarter previous year.

Earnings excluding one-off costs reached 52 cents per share, said the automaker in a prepared statement on Thursday. Ford had $4.2 billion in positive automotive cash flow, a record for any quarter. Passage sold 1.7 million vehicles amid the quarter, which was level from a year back. Ford's stock tumbled 8.5% in morning trade after reporting second-quarter earnings that missed expectations. Its margin for the region decreased to 11.3 percent from 12.2 percent a year ago.

(Copyright © 2015. All Rights Reserved.)
 
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