Ford Posts 16th Straight Quarterly Profit; Europe Remains Difficult

Ford steamrolls through the year’s second quarter, posting a $1.23 billion profit with market-share increases and record returns in key regions.

The result marks the 16^th consecutive quarter of profitability for the Dearborn, MI-based company.

Ford President and CEO Alan Mulally calls the April-June period financially outstanding, and says, “Overall, we expect global growth to continue in 2013.”

But while the auto maker remains bullish on the world market, it warns of continued difficulty in Europe and a bumpy second half in South America.

Ford’s better-then-expected profit represents an 18.5% improvement over year-ago and equal to $0.30 per share after special items, up from $0.26 per share in like-2012.

Revenue grew 14.4% to $38.1 billion, from $33.3 billion year-ago, on a 16.0% surge in worldwide sales to 1.7 million units from 1.4 million.

The auto maker now expects to equal or exceed its 2012 pre-tax profit of $8 billion after previously saying it likely would match that total.

The sole black mark on Ford’s Q2 results comes from Europe, where the auto maker posted a pre-tax loss of $348 million. However, the loss is narrowed by $56 million from $404 million year-ago, and the auto maker enjoyed a 7.0% rise in revenue to $7.6 billion from $7.1 billion in like-2012. Sales rose 8.9% to 391,000 units from 369,000.

Ford Chief Financial Officer Bob Shanks does not consider the sales gains sustainable because they came off planned reductions in dealers’ stocks. Overall, he says the auto maker’s turnaround plan in the region remains on track, including the closure of two manufacturing sites in the U.K. and one in Belgium, to align capacity with weak demand.

Ford, as well as cross-town-rival General Motors, which also saw losses in Europe, expects to return to profitability in the region by mid-decade. Mulally says the region’s combined 19 auto markets “may have begun to stabilize.”

Ford saw Q2 improvement in South America, where pre-tax profits shot up to $151 million from $5.0 million year-ago on double-digit sales and revenue gains.

However, the auto maker reports a first-half loss of $67 million and predicts further bumpiness for the remaining year due to a weakened market in Brazil and Argentina and currency pressures in Venezuela. Mulally predicts Ford will break even in South America.

Elsewhere in the world, Ford fired on all cylinders.

In North America, the auto maker’s Q2 pre-tax profit climbed 15.9% to $2.33 billion from $2.01 billion year-ago, marking the fifth time in the past six quarters that Ford North America has delivered a pre-tax profit above $2 billion.

North American revenue jumped 13.7% to $22.4 billion from $19.7 billion in like-2012, and unit sales rose 14.5% to 823,000 from 719,000.

Shanks cites brisk sales of the auto maker’s F-Series trucks, as the large-pickup market in the U.S. continues to rebound with the comeback in new-home construction, and the popularity of the C-Max hybrid and redesigned Escape 5-passenger cross/utility vehicle.

He also points to a “disciplined” North American production schedule, where output matches demand to keep incentives low, as well as the auto maker’s leaner cost structure coming out of its restructuring.

Ford’s Asia-Pacific/Africa region turned in a best-ever Q2 result as operations there swung to a $177 million pre-tax profit from a loss of $66 million year-ago. Revenue, excluding the auto maker’s joint ventures in China, surged 30.4% to $3.0 billion from $2.3 billion. Unit sales increased 26.8% to 317,000 from 250,000.

Shanks says the increases came on the strength of Ford’s expanded portfolio in the region, bringing global products tailored to specific markets.

Ford’s treasury finished the first half with $3.3 billion in cash and $37.1 billion in available liquidity. Debt fell $2 billion from the first quarter to $15.8 billion.

Addressing last week’s Chapter 9 bankruptcy filing by the City of Detroit, Shanks says Ford does not expect to feel any impact from the legal proceedings.

He does say Detroit’s comeback will be much like Ford’s. “When you come out the other end, you are much healthier,” Shanks says. “We’re a good example of that.”

[email protected]