Restructuring Costs Offset Profitability Profits – Motley Fool

Ford Motor Company (NYSE: F) said on April 25 that it achieved a net income of $ 1.1 billion in the first quarter of 2019, down 35% from a year ago of nearly $ 600 million. in one-time fees related to overseas restructuring work.

But the degree of profit was undoubtedly the real story. In addition to the one-time fees, Ford drove $ 0.44 per share, well beyond the average estimate of $ 0.26 per share from Wall Street analysts after Thomson Reuters when the company's adjusted operating revenue increased by 14% to $ 2.4 billion dollar.

Ford's automotive segment revenue of $ 37.2 billion also came ahead of analysts' average estimate of $ 37.0 billion, despite a 1[ads1]4.3% decline in wholesale deliveries.

  Two full-size cars from Ford, a 2019 Super Duty and a 2019 F-150.

U.S. Ford's F Series pickup sales increased only 0.2% in the first quarter, but average transaction prices remained strong, and Ford contributed to a better profit margin in North America. Source: Ford Motor Company.

Ford Earnings: Raw Numbers

Metric Q1 2019 Change to Q1 2018
Revenue $ 40.3 billion (3.8%) [19659014] Wholesale [19659012] 1,425,000 (14.3%)
Adjusted EBIT $ 2.4 billion 14.3%
Adjusted EBIT margin 6.1% 0.9 ppts
One $ 592 million $ 615 million worse
Net income $ 1.1 billion (35.3%)
Adjusted cash flow $ 1 , $ 9 billion (36.7%)
Adjusted earnings per share $ 0.44 $ 0.01 higher

Data source: Ford Motor Company. Wholesale shipments are rounded to the nearest thousand. "Adjusted" figures exclude the effects of one-off items. "EBIT" = income before interest and tax. "Ppts" = percentage.

How Ford's business units were executed

Here's how each of Ford's business segments performed in the first quarter of 2019. Note that all financial results in this section are reported on an EBIT basis, except as noted. [19659003] North America: Ford earned $ 2.2 billion in North America, up $ 270 million from a year ago on an improved "mix" of cars. Simply put, Ford's sales of (lower margin) cars fell significantly, while sales of higher-margin F-series and Ranger pickups and Transit commercial vans were strong. The result: An improvement in profit despite a 5% reduction in total sales.

Ford's EBIT margin in North America, a well-monitored number, improved to a healthy 8.7% from 7.8% a year ago.

South America: Ford lost $ 158 million in South America in the first quarter, slightly worse than $ 149 million lost in the first quarter of 2018. Strong price gains and incremental cost improvements were offset by unfavorable exchange rates and local inflation. During the quarter, Ford announced that it will close a truck factory in Brazil by the end of 2019, with a total cost of about $ 460 million. Ford said moving will pay itself in two years. Europe : Ford achieved $ 57 million in Europe in the first quarter, down from $ 119 million in the previous period of adverse changes in the value of the euro against the dollar. While Ford's wholesale deliveries in the region fell 13% from the previous year, pricing improvements have more than compensated for the economic impact of sales. The cost was about flat from a year ago, helped by some early gains from an ongoing restructuring work.

Middle East and Africa: Ford earned $ 14 million in this region in the first quarter, up from a loss of $ 54 million in the first quarter of 2018. Cost reductions and a year over-year improvement in the mix of products sold in the region drove the gain.

China : Ford lost $ 128 million in China in the first quarter, an improvement of $ 22 million from a year ago. Strong cost reductions and (for once) favorable exchange rate movements more than offset the effect of a 48% decline from the previous year. Equity income from Ford's joint ventures with Chinese automakers was negative, a loss of $ 41 million against a $ 138 million profit a year ago.

Asia Pacific : Ford Asia Pacific (now excluding China) earned $ 19 million in the first quarter, down from $ 31 million a year ago. While the region remains profitable, poorer exchange rate fluctuations more than outweigh gains from improved sales and cost reductions.

Ford Credit : Ford Credit generated pre-tax profit (EBT) of $ 801 million, an improvement of 25% from the previous year. Lower depreciation of leased cars and improvements in credit losses drove the profits.

About these one-time fees

Ford's strong improvement in adjusted EBIT was more than offset by $ 592 million in one-off fees. Much of the total – $ 514 million, to be exact – was related to a number of cost-cutting measures in Europe and South America, including the closure of this Brazilian truck factory and the decommissioning of some of Ford's operations in Russia. Much of the rest was related to Ford's decision to interrupt the generation of next generation focus in North America.

All but $ 136 million of one-time fees were non-cash accounting fees, Ford said. Ford, debt and total liquidity

Ford ended the first quarter with $ 24.2 billion in cash available to the automotive industry, up from $ 23.1 billion at the end of 2018. It had an additional $ 11 billion available credit lines, for total liquidity of $ 35.2 billion. Ford had Ford $ 14.2 billion in well-structured long-term debt, up slightly from $ 14.1 billion at the end of 2018.

Looking Ahead: Ford's 2019 Guide

Ford showed something on the vague guidance it gave in January . It now expects revenue, adjusted EBIT margin and adjusted return on invested capital to improve in 2019 compared to the 2018 results. The company is still declining to provide specific targets for 2019, but CFO Bob Shanks said in an interview that the costs associated with launching new products and Ford's ongoing restructuring will weigh against earnings as the year unfolds.

Long story short: Ford's adjusted EBIT was quite good in the first quarter, said Shanks that it may be less impressive when the year goes on – but the full-year result in 2019 will be better than in 2018.

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