Ford Q2 net profit slips $190m to $2bn

Ford Motor Co.’s second-quarter profit fell short of analysts’ estimates, driving shares down the most in 11 months, after the company warned that a stalling USA auto market is imperiling its full-year earnings target.

In North America, Ford posted a pretax profit of $2.7 billion, 5.3 percent lower than the same period previous year.

Income was up 6 percent to $39.5 billion, beating investigators’ desires. It derived 90% of its $2.99bn pre-tax profit from North America during the quarter.

North America pre-tax profit of $2.7 billion was down $135 million with an operating margin of 11.3%, but US market share was 15.3%, which was an increase three-tenths of a point.

“We delivered another strong quarter – one of our best second quarters ever – and record pre-tax profits for the first half of this year”, Ford President and CEO Mark Fields said in a statement.

Retail light-vehicle sales in the US slowed over the first half, and Mr. Shanks said he takes that as a sign the market has peaked after six consecutive years of industry growth. Ford’s Chief Financial Officer Bob Shanks said after an unprecedented growth streak, the US market is starting to plateau.

Ford’s two remaining United Kingdom plants are at Bridgend and Dagenham, making engines which are exported to other European Union countries for final assembly. Ford warned of “weaker-than-normal conditions” for the second half of the year, and said there was an “elevated economic uncertainty restraining business investment, with downside risk to global growth”.

But the company projected 2016 operating results to be equal to or better than the $10.8 billion earned in 2015.

“We see and impact of about $145 million in the second half from Brexit”, Shanks said.

“This is the first full redesign in 19 years, so this is a really, really big launch”, Shanks said. Rival General Motors’ shares fell by 3.65%.

Benchmark 10-year Treasury notes US10YT=RR gained 1/32 in price to yield 1.5113 percent.

To deal with lower USA demand, Ford signaled it is prepared to trim production, and it will accelerate its “cost- attack” plan to meet its full-year guidance. Ford lowered its estimates for full-year industry sales in the US and said next year’s sales will be even weaker. Shanks noted that because most of the vehicles Ford sells in the region are imported from elsewhere, the regional team’s ability to cut costs is very limited.

Europe, long a drag on profits, was a splendid spot, with deals up 11 percent.

But Ford lost $8 million pretax in China, the world’s No. 1 auto market, vs. a $210 million profit a year ago. Analysts’ estimates typically exclude special items.

In Asia, Ford recorded its first pretax loss of $ 8 million, in more than three years.

The profit, of 52 cents per share, compared to a profit of 54 cents per share in the April-June period year ago.

Ford Credit profits dropped by 20% to 400 million due to the aforementioned auction problem.

Net income was down by $190 million from a year ago, even as revenue jumped $2.2 billion. Passage sold 1.7 million vehicles amid the quarter, which was level from a year back. Regions outside North America collectively also were profitable for a third consecutive quarter and automotive segment’s operating margin was 7.7%.

The shares fell 6.9 percent in the second quarter.