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Abu Dhabi, UAEMonday 25 June 2018

Pickup trucks give Ford net profit a lift but car maker lowers annual forecast

The second-biggest US car maker leaned heavily on consumer discounts during the quarter

The US car industry is bracing for a downturn with four consecutive months of declining sales. Reuters
The US car industry is bracing for a downturn with four consecutive months of declining sales. Reuters

Ford on Wednesday reported a better than expected quarterly net profit due to a lower tax rate and increased US sales of more-profitable pickup trucks, but forecast a slightly lower 2017 pre-tax profit and its shares dipped 1.2 per cent in premarket trading.

The second-biggest US car maker leaned heavily on consumer discounts during the quarter and the value of its unsold vehicles rose. Ford also warned that its full-year automotive operating margin and cash flow would be lower than in 2016.

It said, however, that the reduced tax rate would boost its full-year net profit.

Ford shares were down 13 cents at US$11.14.

Michigan-based Ford's results come as the US car industry is bracing for a downturn with four consecutive months of declining sales. Analysts are concerned about the high discounts automakers are using to sell their vehicles and high supplies of unsold vehicles.

Rival General Motors on Tuesday reported a better than expected quarterly profit, helped by cost-cutting, and promised to scale back production to cut its burgeoning inventories.

Ford said it now expect full-year adjusted earnings per share in a range from $1.65 to $1.85, above the $1.51 expected by Wall Street, according to Thomson Reuters I/B/E/S.

But the chief financial officer Bob Shanks said this would be largely due to a tax rate of 15 per cent for the year as Ford pulls forward deferred tax losses from outside the United States and that the exact number could be affected by how the market performs in the second half of the year. Wall Street had expected an effective tax rate of 30 per cent for 2017.

Mr Shanks said the company's pre-tax profit would be slightly lower than the $9 billion Ford has previously forecast. Last year Ford reported a record pre-tax profit of $10.4bn.

Mr Shanks said the company has cancelled plans to build the next generation of its compact Focus model in South America. For the North American market, Ford announced last month that it would move production of the Focus to China from Mexico.

The company reported second-quarter net income of $2.04bn, or 51 cents per share, up from just under $2bn, or 49 cents per share, a year earlier. Excluding one-time items, it reported earnings per share of 56 cents, and on that basis analysts, on average, looked for 43 cents.

* Reuters