Ford has reported pre-tax earnings, excluding special items, of US$2,163m in the third quarter of 2012, a US$219m or 11.3% gain from the Q3 2011 result of US$1,944m. Revenue in the latest quarter was US$32.1bn, versus US$33.1bn in the previous year, with wholesales down 17,000 year-on-year at 1,329,000 units (1,346,000).
The Q3 results took 9M 2012 pre-tax earnings to US$6,285m, versus US$7,659m in the first three quarters of 2011, a fall of 17.9%, on revenue of US$97.8bn (US$101.7bn; -3.8%). Wholesales in the first nine months of 2012 totalled 4,134,000, against 4,268,000, a fall of 134,000 units, or 3.1%.
Q3 net income was US$1,631m, a decrease of US$18m from the third quarter 2011 result (US$1,649m). 9M 2012 net income was US$4,067m, compared with US$6,598m in the first three quarters of the previous year, a fall of US$2,531m, or 38.4%.
Total Automotive pre-tax operating profit (excluding special items) in the July-September 2012 period was US$1,775m, an increase of US$436m from the Q3 2011 result (US$1,339m), reflecting stronger earnings at Ford North America and an improvement at Ford Asia Pacific Africa. In contrast, losses accelerated at Ford of Europe and almost evaporated at Ford South America. 9M 2012 pre-tax earnings were US$4,994m, versus US$5,746m in 9M 2011, a fall of US$752m, or just over 13%.
Total Automotive revenue in Q3 2012 was US$30.2bn, versus US$31.1bn in the Q3 2011 period, while revenue in the first nine months of 2012 was US$92.1bn, down US$3.5bn from the 9M 2011 result of US$95.6bn.
North America reported a pre-tax operating profit of US$2,328m in the latest quarter, up 50.2% (US$778m) compared with a profit of US$1,550m a year ago. The margin improved to 12.0% from 8.6% a year ago. The profit rise reflected favourable volume and mix, higher net pricing and lower contribution costs and mainly favourable commodity hedging effect. Higher structural costs and unfavourable exchange were partial offsets. January-September 2012 profit was US$6,471m, compared with US$5,302m in 9M 2011, a rise of 22.0%, the margin rising to 11.2% from 9.6%.
Wholesales in the region in Q2 were 659,000 units, up 17,000 units from a year ago, while revenue was US$19.5bn, up US$1.5bn from a year ago (US$18.0bn). Wholesales in the year-to-date period were 2,029,000, versus 1,993,000 in 2011, with revenue at US$57.8bn (US$55.4bn).
With regard to the remainder of the year, the company’s outlook for North America remains unchanged. The OEM expects significantly higher pre-tax operating profit and margin compared with 2011 and has said it remains committed to maintaining its competitive cost structure as it grows its business in North America. It noted that during the latest quarter, it added a shift to its Louisville Assembly Plant, where it builds the all-new Escape. This was the last major action in the company’s plan to add 400,000 units of annual incremental capacity by the end of the year.
South America reported a pre-tax operating profit of just US$9m in the third quarter of 2012, down from a profit of US$276m a year ago, due to unfavourable exchange – mainly a weaker Brazilian real – unfavourable volume and mix, and higher costs. The margin in Q3 2012 was 0.4%, against 9.3% in Q3 2011. Profit in the first nine months of the current year was US$68m (1.0% margin), versus US$753m (9.2%) in the previous year.
Wholesales in Q3 totalled 117,000 units, down 16,000 units from a year ago, while revenue was US$2.3bn, compared with US$3.0bn a year ago. Nine-month wholesales totalled 354,000, down from 382,000 in 2011, while revenue decreased to US$7.0bn (US$8.2bn).
Ford said it continues to expect that Ford South America will be profitable for the full year, but that it still expects the level to be substantially lower than in 2011.
Ford’s much publicised poor performance in Europe continues to be a substantial and escalating burden on the company’s overall profitability, the region reporting a pre-tax operating loss of US$468m in the latest quarter, compared with a loss of US$306m in Q3 2011. According to Ford, this continued to reflect unfavourable market factors, including the lowest level of industry sales in almost 20 years. The decline was more than explained by lower volume, including lower industry, lower share and unfavourable dealer stock changes. Lower costs and favourable exchange were only partial offsets.
The Q3 loss took the year-to-date loss in Europe to US$1,021m, compared with a profit of US$163m in the January-September 2011 period.
Wholesales in Q3 were 295,000 units, down 62,000 units from a year ago, while revenue, which excludes contributions from unconsolidated joint ventures, was US$5.8bn, a year-on-year decline of US$2.0bn. 9M 2012 wholesales totalled 1,026,000, against 1,211,000 in 9M 2011, while revenue fell to US$20.1bn from US$25.5bn.
The company has reiterated its recent forecast that it now expects Ford Europe’s pre-tax loss for full year 2012 to exceed US$1.5bn, although recently announced plant closures and other actions to accelerate the company’s European transformation and restore its European operations to profitability by mid-decade target a long-term operating margin for Ford Europe of 6-8%.
Asia Pacific Africa reported a return to profit in the latest quarter, at US$45m, an US$88m reversal from the loss of US$43m reported in Q3 2011. The third quarter profit improvement was explained by favourable volume and mix, higher net pricing and favourable exchange, offset partially by higher costs associated with new products and investments to support higher volumes and future growth. The Q2 profit took the 9M 2012 result to a loss of US$116m (loss of US$9m).
Wholesales in Q3 were 258,000 units, up 44,000 units from a year ago and revenue, which again excludes sales at unconsolidated joint ventures, was US$2.6bn, up US$0.3bn from a year ago. 9M wholesales were 725,000, up 43,000 year-on-year, while revenue increased to US$7.2bn from US$6.5bn.
For the full year, Ford expects Asia Pacific Africa results to be a loss, roughly in line with 2011.
Other Automotive reported a loss of US$139m in Q3 2012, up just US$1m from a loss of US$138m in Q3 2011. The loss mainly reflected net interest expense. For the full year, Ford expects net interest expense to be about US$500m, consistent with the low end of prior guidance.
Ford generated positive Automotive operating-related cash flow of US$0.7bn in Q3 2012 (US$0.4bn) and had Automotive gross cash of US$24.1bn as of 30 September 2012 (US$20.8bn as of end-September 2011).
Alan Mulally, Ford President and Chief Executive Officer, commented: “The Ford team delivered a best-ever third quarter, driven by record results in North America and the continued strength of Ford Credit. While we are facing near-term challenges in Europe, we are fully committed to transforming our business in Europe by moving decisively to match production to demand, improve revenue through new products and a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business.”
Bob Shanks, Ford’s Chief Financial Officer, added: “Our record quarterly profit and operating margin in North America, the acceleration of the transformation of our business in Europe that will return it to profitability by mid-decade, and the achievement of record quarterly Ford market share in both Asia Pacific Africa and in China all demonstrate that our One Ford plan is working. We will continue to assess opportunities to strengthen our business and achieve profitable growth in all the regions in which we operate.”
