Ford Earns $997 Million, Projects Solid 2011 Profit (Update2)
By Keith Naughton
Nov. 2 (Bloomberg) -- Ford Motor Co., the only major U.S. automaker to avoid bankruptcy, posted net income of $997 million in the third quarter and its first operating profit since early 2008. Ford said it expects to be “solidly profitable” in 2011.
On an adjusted basis, Ford reported a quarterly pretax profit of $1.1 billion, or 26 cents a share, compared with a year-earlier loss of $3 billion, or $1.32. Ford beat the 20 cents a share adjusted loss expected by an average of 11 analysts surveyed by Bloomberg.
Chief Executive Officer Alan Mulally, who kept Ford out of Chapter 11 as General Motors Co. and Chrysler Group LLC reorganized, is trying to extend sales momentum the Dearborn, Michigan-based automaker built by avoiding a bailout. It posted its first consecutive quarterly net profit under Mulally today.
“Ford is a company that’s well into a turnaround,” said Bernie McGinn, president of McGinn Investment Management of Alexandria, Virginia, which owns about 320,000 Ford shares. “They did it by themselves and didn’t take government money. That gives people a good gut feeling and they’re being rewarded for that.”
Ford shares gained 67 cents, or 9.6 percent, to $7.67 before New York Stock Exchange composite trading. The shares had declined 2.9 percent since the end of September after more than tripling this year.
The company reported a quarterly net profit of 29 cents a share, compared with net loss of $161 million, or 7 cents, a year earlier. Ford had positive automotive cash flow of $1.3 billion compared with cash consumption of $1 billion in the second quarter. In the year-earlier quarter, Ford used $7.7 billion.
‘Strong Profit in 2011’
“We now expect to return to a strong profit in 2011 and positive cash flow,” Chief Financial Officer Lewis Booth told reporters. “There are still some headwinds, particularly economic headwinds. What happens in the balance of the year will be a good economic indicator.”
Ford issued $565 million in “quiet equity” in the third quarter, completing a $1 billion stock issue it began in August 2008, Booth said. That equity was used to improve Ford’s balance sheet, he said. Ford expects to have positive cash flow in the fourth quarter, he said.
“We still have balance-sheet issues to work on,” Booth said. “We continue to manage the business very strongly around cash.”
Ford finished the third quarter with $23.8 billion in automotive cash, up from $21 billion at the end of the second quarter.
Automotive Revenue
Automotive revenue rose $100 million from a year ago, while third-quarter sales fell 2.5 percent to $30.9 billion as Ford boosted North American production by 18 percent during the period. The average estimate for total revenue was for $28.5 billion, according to 8 analysts surveyed by Bloomberg.
Ford will end the year with $18.2 billion in automotive cash, said Barclays Capital auto analyst Brian Johnson, who upgraded the shares Oct. 20 to “equal weight” from “underweight.”
“With improving performance, we continue to expect Ford to meet its minimum cash need through 2011,” wrote Johnson, who is based in Chicago.
The automaker’s Ford Credit unit reported net income of $427 million in the third quarter, up from $95 million a year earlier. It will be profitable in the fourth quarter and next year, Booth said.
The automaker will project 2010 results when it releases full-year 2009 results, the company said in a statement.
UAW Rejection
Headwinds buffeting Ford include a debt load larger than that of restructured rivals and the rejection, according to people familiar with the matter, of cost-cutting contract concessions by United Auto Workers union members. While Detroit- based GM’s liabilities will be $22.3 billion in 2011, Ford’s total will be $38.1 billion, Johnson estimated.
Ford reported its fourth quarterly net income since Mulally became CEO in 2006, including $2.26 billion in the second quarter after an accounting gain. He hasn’t presided over an annual profit at Ford, which has posted three straight full-year losses totaling $30 billion.
While the U.S. government’s “cash for clunkers” incentive program helped boost Ford’s performance in the quarter, it wasn’t the primary driver of profitability, Booth said. Ford’s North American auto operations had a pretax profit of $357 million, its first positive result since the first quarter of 2005, the automaker said. North American revenue rose to $13.7 billion from $10.8 billion in the year-earlier quarter.
Ford expects the U.S. market to end with 10.4 million light-vehicle sales, down from 13.2 million last year. Ford projects industrywide light-vehicle sales to grow to 12.3 million next year and 14.3 million in 2011.
To contact the reporter on this story: Keith Naughton in Southfield, Michigan at Knaughton3@bloomberg.net
Last Updated: November 2, 2009 09:22 EST |
