Wednesday, April 24, 2013 4:19 pm
Ford's first quarter profit up 15 pct to $1.6b
By DEE-ANN DURBINAP Auto Writer
Ford earned 40 cents per share, up from 35 cents in the same quarter a year ago. Without one-time charges, including restructuring costs in Europe, Ford would have earned 41 cents. That beat Wall Street's forecast of 37 cents, according to analysts polled by FactSet.
"It's a very good start to the year for us," Ford's Chief Financial Officer Bob Shanks said Wednesday.
Ford earned $2.4 billion in North America, the highest quarterly total since the company began reporting results regionally in 2000.
The Fusion midsize sedan and Escape SUV - newly redesigned for the 2013 model year - were powerhouses in the quarter. U.S. sales of both vehicles rose 25 percent. With its sharp styling and unique, hexagonal grille, the Fusion gained share from perennial midsize leaders like the Toyota Camry and Nissan Altima. Ford sold 80,558 Fusions in the quarter. The angular Escape SUV was right behind with nearly 73,000 in sales, drawing buyers from older models like the Honda CR-V with promises of better fuel economy and towing capacity.
Ford's F-Series trucks, the best-selling vehicles in the U.S., are getting a boost from an improvement in home building and other construction. F-Series sales rose 17 percent in the first quarter, or nearly three times the average sales increase for the industry, according to Autodata Corp.
U.S. buyers paid an average $32,784 for a Ford in the first quarter, or around $1,000 more than the same period a year ago, according to Internet buying site TrueCar.com.
Investors' reaction was muted. Ford's shares slipped 3 cents to $13.33. They had gained nearly 5 percent in the three days before the earnings. The shares have traded in a 52-week range of $8.82 to $14.30.
Jamie Albertine, an auto analyst with Stifel Nicolaus, said investors may not have liked Ford's rising costs in North America. Ford's operating margin in the region fell slightly to 11 percent from 11.5 percent in the same period a year ago. Ford said that was partly due to increased hiring and production.
Albertine said investors also tend to dismiss gains that are based, in part, on a finance arm. Ford Credit contributed $503 million to the company's results in the first quarter.
Ford eked out a $6 million profit in its Asia Pacific and Africa region. The Ford Focus small car has quickly become a best-seller in China, where Ford's sales were up 54 percent in the quarter.
But the results were tempered by Ford's seventh straight quarterly loss in Europe, where a recession has devastated car sales. Ford lost $462 million in Europe in the first quarter as sales plummeted 20 percent. Ford reiterated that it expects to lose $2 billion in Europe this year.
Results from European automakers captured the gloom. Germany's Volkswagen AG reported a 38 percent decline in its net profit, to $2.5 billion, and Daimler AG said its profit fell 60 percent to $733 million. European auto sales have fallen steadily for the last 18 months as a government debt crisis has weakened the economy and made consumers unable or afraid to take on a large purchase.
Ford's European sales fell at almost double the pace of the rest of the industry in the first quarter. Shanks said Ford deliberately cut back on low-profit sales to rental car companies. Disruptions at its Genk, Belgium, assembly plant reduced the number of vehicles available.
But Shanks saw reasons for optimism in Europe. Consumer confidence, export levels and other indicators are improving, he said, and sales appear to have bottomed out in some of the countries hardest hit by the recession, including Spain and Greece.
"I think, hopefully, that we might be running along the bottom right now," Shanks said. He said sales could start improving later this year or early next year.
Ford also hopes a slew of new products will juice sales. Ford pledged last year to bring 15 new vehicles to Europe by 2015, and seven of those have arrived, including the revamped Fiesta subcompact and Kuga small SUV. This mirrors a strategy Ford used in the U.S. to boost sales during the recession.
Europe isn't Ford's only trouble spot. The company lost $218 million in South America, partly due to a currency devaluation in Venezuela. The company said it still expects to break even in the region this year.
Overall, Ford's revenue rose 10 percent to $35.8 billion, beating Wall Street's forecast of $33.5 billion.
Ford's profit margins fell to 5.2 percent from 6.4 percent in the same quarter a year ago. Shanks said adding plant shifts and workers to meet growing vehicle demand is eating into profits. Ford plans to increase second quarter production by 13 percent worldwide, to 1.6 million cars and trucks. Its is also selling a higher proportion of small and midsize cars, which are less profitable than trucks and SUVs.
In a note to investors, Barclays analyst Brian Johnson said Ford clearly prefers to re-invest its profits in product development rather than achieve higher margins.
"Overall, we believe the quarter demonstrates the consistency of the company and the steady path of growth that the company is on," he wrote.