Ford’s 2Q profit falls on trouble in US, China

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DEARBORN, Mich. — Ford Motor Co.’s net income fell 9 percent to $2.0 billion in the second quarter as the company struggled with flattening U.S. sales and a tougher market in China.

Ford said its full-year guidance — which calls for a pretax profit of $10 billion to $11 billion — remains intact, and the company noted that its first-half operating profit of $6.8 billion is the company’s best ever.

But Ford acknowledged that its guidance is at risk. Among the looming issues in the second half of the year is the expensive launch of Ford’s new aluminum-sided Super Duty pickup truck and an expected $145 million hit to sales in Britain because of its vote to leave the European Union.

Europe — long a drag on profits — was a bright spot, with sales up 11 percent. Pretax profits in Europe almost tripled to $467 million. Stronger sales in Russia were one contributing factor, Ford’s Chief Financial Officer Bob Shanks said.

But there are some storm clouds. Shanks said Britain’s exit vote will likely cost the company $400 million to $500 million annually in lower sales and weaker currency until the exit is completed. There’s too much uncertainty to predict much after that, Shanks said, but the company is considering how to mitigate its risks. Ford is one of the top-selling brands in the U.K. and has engine and transmission plants there.

This time, the bad news came from North America and Asia. Ford’s Chief Financial Officer Bob Shanks said after an unprecedented growth streak, the U.S. market is starting to plateau. North American sales were flat from a year ago, and Ford’s market share in the region didn’t budge despite higher incentive spending. Pretax results in the region fell 5 percent to $2.7 billion.

“We don’t see growth, at least in the near term,” Shanks said. Ford lowered its estimates for full-year industry sales in the U.S. and said next year’s sales will be even weaker.

In Asia, Ford recorded its first pretax loss — of $8 million — in more than three years. Shanks said Ford sold fewer commercial vehicles in China and spent heavily on engineering and warranty costs. The weaker yuan also impacted sales of its luxury Lincoln brand.

Ford’s losses in South America also more than doubled to $265 million because of continuing economic issues in the region.

The profit, of 52 cents per share, compared to a profit of 54 cents per share in the April-June period year ago. That missed Wall Street’s expectation of a proft of 60 cents per share, according to analysts polled by FactSet.

Revenue was up 6 percent to $39.5 billion. Automotive revenue of $37 billion beat analysts’ expectations. Ford sold 1.7 million vehicles during the quarter, which was flat from a year ago.

Ford’s automotive operating margin fell from 8.4 percent in the second quarter last year to 7.7 percent this year. Its North American operating margin fell from 12.2 percent to 11.3 percent.

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