Ford posts quarterly profit, raises 2010 outlook
Ford Motor Co posted a stronger-than-expected $2.1bn quarterly profit as North American production picked up and the automaker said it would be "solidly profitable" in 2010, a year ahead of its prior outlook27/04/2010
Ford also raised its North American production plan for the current quarter as well as the 2010 outlook for its Ford Motor Credit financing arm.
Chief Executive Alan Mulally said the results were "further evidence" that the automaker's turnaround was working.
"The basic engine that drives our business results - products, market share, revenue, and cost structure - is performing stronger each quarter," Mulally told analysts on a conference call.
The first-quarter results included operating profits at all of its automotive units, including the Swedish brand Volvo which Ford has agreed to sell to China's Geely.
Ford has benefited from improved public perception, in part because of the government bailouts of General Motors and Chrysler, and Toyota Motor Corp's massive US vehicle recalls and sales halt in the first quarter.
Ford's edge may begin to fade with Toyota offering record incentives to boost US sales, GM repaying government loans and Chrysler declaring a first-quarter operating profit.
"Just looking at the first-page numbers, they had a fantastic quarter," Morningstar analyst David Whiston said. "But it would not be easy competition going forward... It will get a little bit harder for Ford to keep it up in North America."
CFO Lewis Booth said Ford's net pricing held flat in the first quarter from the previous quarter despite the unprecedented discounting by Toyota.
Fueled by strong sales of its smaller, fuel-efficient vehicles such as the Focus compact and Fusion mid-size sedan, Ford's US sales jumped nearly 38 percent in the first quarter, more than doubling the industry sales growth.
Ford's US market share jumped to 16.8 percent in the first quarter, up sharply from 14.1 percent in the same period a year ago and 15.5 percent for the full year 2009.
The automaker has been rebuilding a North American lineup that had come to rely too heavily on SUVs and pickup trucks.
Net income amounted to $2.1bn, or 50 cents per share, in the first quarter, compared with a year-earlier net loss of $1.4bn, or 60 cents per share. Revenue rose to $28.1bn from $24.4bn.
Excluding one-time items, earnings were 46 cents per share. On that basis, analysts on average expected profit of 31 cents, according to Thomson Reuters.
This was Ford's highest quarterly pretax profit in six years.
In addition, it was the fourth consecutive quarterly profit for Ford, which also reported a full-year 2009 profit, snapping a streak of annual losses totaling $30bn from 2006 through 2008.
Ford Credit had its highest operating profit since the second quarter of 2005, and it now expects 2010 earnings to be about the same as in 2009, rather than declining as it had forecast earlier.
Paying down debt key
Ford investors now are focused on the sustainability of the turnaround. Ford's results follow Chrysler's announcement earlier in April that it made a first-quarter operating profit. GM plans to release first-quarter results in mid-May.
GM also said it would invest $890m to upgrade five North American plants to produce small engines and related components.
Ford borrowed more than $23bn in late 2006 to fund the turnaround, allowing it to avoid the US government-supported bankruptcies that snared GM and Chrysler last year, but leaving it with far more debt than its US-based rivals.
Ford ended the first quarter with automotive debt of $34.3bn, an increase of $700m from year-end 2009, but paid down $3bn of debt in April that will be reflected in second-quarter results.
The company also had an automotive operating cash outflow of $100m in the first quarter, but expects positive operating cash flow for the year.
The speed of Ford's turnaround in part remains tied to the strength of the US economy and the pace of the recovery in US auto sales, which last year had sunk to 10.4 million vehicles, their lowest level since the early 1980s.
Booth said Ford was seeing some recovery in the US economy, about in line with expectations, but Europe remained a concern with government incentive programs winding down. Ford also expects some headwinds from commodity prices.
Ford left intact its forecast for 2010 US auto industry sales of 11.5 million to 12.5 million vehicles, including medium and heavy trucks.
The automaker raised its second-quarter North American production plan by five percent to 625,000 vehicles, which would be up 38 percent from a year earlier.
Ford stock has more than tripled in the past year and set a five-year high on April 27 on the New York Stock Exchange amid a gradual improvement in the automaker's financial results and a slow recovery in the US economy.
