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Ford’s Expectations for Better Full-Year 2021 Operating Results Driven by Strong Order Bank, Improving Semiconductor Supplies
“Ford+ is about creating distinctive products and services, always-on customer relationships and user experiences that keep improving,” said Jim Farley, Ford’s president and CEO. “And it’s already happening – there are great examples everywhere you turn at Ford, and the benefits for our customers and company will really stack up over time.”
Among Ford+ achievements during Q2, Farley pointed to:
Ford’s Q2 Adjusted EBIT Solid Despite Sequential Drop in Auto Volume
In April, with the semiconductor situation worsening, Ford said it expected to lose about 50% of its planned second-quarter production, which would have resulted in a loss in the period. In fact, Ford did better than expected, leveraging strong demand to optimize revenue and profits through lower incentives and a favorable mix of vehicles, which generated companywide adjusted earnings before interest and taxes of $1.1 billion.
With virtually all of the auto industry’s worldwide manufacturing shut down by the global pandemic for much of second-quarter 2020, Ford’s automotive business grew in the most recent period against key financial measures on a year-over-year basis.
Second-quarter cash flow from operations was $756 million. Adjusted free cash flow for the period was negative $5.1 billion, reflecting the expected greater effect of semiconductor-related volume losses on FCF than EBIT because of adverse working capital and timing differences. Cash and liquidity remain very strong – $25.1 billion and $41.0 billion, respectively, at the end of the quarter.
“We’re on a new path, with the Ford+ plan, financial flexibility and a resolve to make us an even stronger company,” said CFO John Lawler. “We’re developing connected, high-quality vehicles and services that are great for customers and profitable for Ford.”
Ford’s auto business in North America delivered positive EBIT in the quarter on a year-over-year increase of $1.1 billion.
Exiting the second quarter, the combined U.S. customer-sold retail order bank for Mustang Mach-E and other Ford vehicles was seven times larger than at the same point in 2020. With additional current and anticipated demand for models including the Bronco SUV and, later, Maverick and F-150 Lightning pickups, Farley said the business is “spring loaded” for a rebound when semiconductor supplies stabilize and more closely match demand.
Strategic turnarounds of company business units outside of North America remain on track. Aggregate second-quarter EBIT in those regions improved by $828 million year-over-year, but was down from Q1. The sequential drop was primarily attributable to a 35% sequential decline in wholesales in Europe related to semiconductor availability.
Ford’s transformation in Europe is supported by persistent, growing strength with commercial customers, now through Ford Pro, and major investments in electric vehicles. The spending on EVs includes $1 billion for a new manufacturing center rising in Cologne, the planned spring 2022 regional launch of E-Transit commercial vans, and a forthcoming all-electric light commercial vehicle that will be built in Romania.
The Lincoln brand continued to play a major role in improved company performance in China, recording its highest ever quarterly retail sales in Q2. Ninety-seven percent of Lincoln’s volume is now made in-country, lowering production costs. In fact, Lincoln ranked No. 1 in JD Power’s 2021 China Sales Satisfaction Index Study, unseating Audi, which had held the top spot for 11 years.
Ford’s appeal with commercial customers in China continues to grow. Commercial vehicles accounted for 52% of overall sales mix. Later this year, Ford China will introduce a locally built version of the Mustang Mach-E.
In South America, Ford is executing the transformation plan announced there in January. The plan is based on reducing business risks in the region with an asset-light model centered on strengths with Ranger pickups, Transit commercial vans, and selected imported vehicles like the Bronco Sport and Mustang Mach 1.
The company’s International Markets Group delivered another solid quarter, leveraging its strengths with Ranger pickups and Everest SUVs.
In addition to the new collaboration with Argo AI and Lyft, Ford’s Mobility business expects to benefit from Argo’s recent introduction of its own Lidar technology. Farley said capabilities of the Argo Lidar are expected to enable the expansion of autonomous-vehicle services beyond dense urban areas, in the process creating a competitive advantage for Argo and Ford.
Ford Credit delivered record quarterly earnings before taxes of $1.6 billion. Among new capabilities inspired by Ford+, the business is launching Ford Pro FinSimple to provide commercial customers with bundled financing for vehicles, services and EV charging.
Outlook
Lawler said that Ford has raised its expectation for full-year adjusted EBIT by about $3.5 billion, to between $9 billion and $10 billion. Volume is expected to increase by about 30% sequentially from the first to the second half of the year, driving an improvement in market factors net of production costs.
The volume benefit is anticipated to be offset by higher commodity costs, investments in the Ford+ plan and lower earnings by Ford Credit, among other factors, with second-half adjusted EBIT lower than in the first half. The half-to-half comparison is also affected by a $902 million non-cash gain on Ford’s investment in Rivian that was booked in first-quarter 2021.
Additionally, the company has lifted its target for full-year adjusted free cash flow to between $4 billion and $5 billion, supported by expected favorable second-half working capital as vehicle production increases with anticipated improvement in availability of semiconductors.
Ford plans to report its third-quarter 2021 financial results on Oct. 27.
# # #
About Ford Motor Company
Ford Motor Company (NYSE: F) is a global company based in Dearborn, Michigan, that is committed to helping build a better world, where every person is free to move and pursue their dreams. The company’s Ford+ plan for growth and value creation combines existing strengths, new capabilities and always-on relationships with customers to enrich experiences for and deepen the loyalty of those customers. Ford designs, manufactures, markets and services a full line of connected, increasingly electrified passenger and commercial vehicles: Ford trucks, utility vehicles, vans and cars, and Lincoln luxury vehicles. The company is pursuing leadership positions in electrification, connected vehicle services and mobility solutions, including self-driving technology, and provides financial services through Ford Motor Credit Company. Ford employs about 182,000 people worldwide. More information about the company, its products and Ford Motor Credit Company is available at corporate.ford.com.
Conference Call Details
Ford Motor Company (NYSE: F) and Ford Motor Credit Company released their 2021 second-quarter financial results at 4:05 p.m. ET on Wednesday, July 28. Following the release, Jim Farley, Ford president and chief executive officer; John Lawler, Ford chief financial officer; and Marion Harris, CEO, Ford Motor Credit, will host a conference call at 5:00 p.m. ET to discuss the results. The presentation and supporting materials will be available at shareholder.ford.com. Representatives of the investment community will have the opportunity to ask questions on the call.
Ford Second-Quarter Earnings Call: Wednesday, July 28, at 5:00 p.m. ET
Toll-Free: 877.870.8664
International: +1.970.297.2423
Passcode: Ford Earnings
Web: shareholder.ford.com
Replay
Available after 8:00 p.m. ET on July 28 and through Aug. 4
Web: shareholder.ford.com
Toll-Free: 855.859.2056
International: +1.404.537.3406
Conference ID: 7590793
The following applies to the information throughout this release:
- Company reports Q2 revenue of $26.8 billion, net income of $561 million and adjusted EBIT of $1.1 billion
- Raises anticipated full-year 2021 adjusted EBIT and adjusted free cash flow, respectively, to between $9 billion and $10 billion and between $4 billion and $5 billion
- Says U.S. customer-sold order bank exiting Q2 more than 7X a year ago, with new models to come – sales ‘’spring loaded’’ for growth when semiconductor supplies normalize
“Ford+ is about creating distinctive products and services, always-on customer relationships and user experiences that keep improving,” said Jim Farley, Ford’s president and CEO. “And it’s already happening – there are great examples everywhere you turn at Ford, and the benefits for our customers and company will really stack up over time.”
Among Ford+ achievements during Q2, Farley pointed to:
- Mustang Mach-E, already ranking No. 2 in sales among all-electric sport utility vehicles in the United States just seven months after shipments to customers began and recently named “Electric Vehicle of the Year” by Car and Driver magazine
- F-150 Lightning – an electric version of the most popular vehicle in the U.S. for more than 40 years – generating 120,000 reservations since its unveiling in May, about three-quarters of them from customers who are new to Ford
- The Maverick, an upcoming five-passenger small pickup with a targeted EPA-estimated rating of 40 miles per gallon in the city and a price that starts at less than $20,000
- Ford Pro, the new standalone commercial vehicle services and distribution business, adding seamless EV charging and energy-management services in June with Ford’s acquisition of Electriphi
- The proprietary Blue Oval Intelligence software stack initiating over-the-air software updates to customer vehicles, with more than 95% of Mustang Mach-E owners opting in for the service, updates delivered to more than 150,000 vehicles of all types so far this year, and four times the number of OTAs expected to be performed by the end of 2021, and
- Ford, Argo AI and Lyft – in an industry-first collaboration – announcing last week they will deploy Ford driverless vehicles on the Lyft network, starting later this year in Miami.
Ford’s Q2 Adjusted EBIT Solid Despite Sequential Drop in Auto Volume
In April, with the semiconductor situation worsening, Ford said it expected to lose about 50% of its planned second-quarter production, which would have resulted in a loss in the period. In fact, Ford did better than expected, leveraging strong demand to optimize revenue and profits through lower incentives and a favorable mix of vehicles, which generated companywide adjusted earnings before interest and taxes of $1.1 billion.
With virtually all of the auto industry’s worldwide manufacturing shut down by the global pandemic for much of second-quarter 2020, Ford’s automotive business grew in the most recent period against key financial measures on a year-over-year basis.
Second-quarter cash flow from operations was $756 million. Adjusted free cash flow for the period was negative $5.1 billion, reflecting the expected greater effect of semiconductor-related volume losses on FCF than EBIT because of adverse working capital and timing differences. Cash and liquidity remain very strong – $25.1 billion and $41.0 billion, respectively, at the end of the quarter.
“We’re on a new path, with the Ford+ plan, financial flexibility and a resolve to make us an even stronger company,” said CFO John Lawler. “We’re developing connected, high-quality vehicles and services that are great for customers and profitable for Ford.”
Ford’s auto business in North America delivered positive EBIT in the quarter on a year-over-year increase of $1.1 billion.
Exiting the second quarter, the combined U.S. customer-sold retail order bank for Mustang Mach-E and other Ford vehicles was seven times larger than at the same point in 2020. With additional current and anticipated demand for models including the Bronco SUV and, later, Maverick and F-150 Lightning pickups, Farley said the business is “spring loaded” for a rebound when semiconductor supplies stabilize and more closely match demand.
Strategic turnarounds of company business units outside of North America remain on track. Aggregate second-quarter EBIT in those regions improved by $828 million year-over-year, but was down from Q1. The sequential drop was primarily attributable to a 35% sequential decline in wholesales in Europe related to semiconductor availability.
Ford’s transformation in Europe is supported by persistent, growing strength with commercial customers, now through Ford Pro, and major investments in electric vehicles. The spending on EVs includes $1 billion for a new manufacturing center rising in Cologne, the planned spring 2022 regional launch of E-Transit commercial vans, and a forthcoming all-electric light commercial vehicle that will be built in Romania.
The Lincoln brand continued to play a major role in improved company performance in China, recording its highest ever quarterly retail sales in Q2. Ninety-seven percent of Lincoln’s volume is now made in-country, lowering production costs. In fact, Lincoln ranked No. 1 in JD Power’s 2021 China Sales Satisfaction Index Study, unseating Audi, which had held the top spot for 11 years.
Ford’s appeal with commercial customers in China continues to grow. Commercial vehicles accounted for 52% of overall sales mix. Later this year, Ford China will introduce a locally built version of the Mustang Mach-E.
In South America, Ford is executing the transformation plan announced there in January. The plan is based on reducing business risks in the region with an asset-light model centered on strengths with Ranger pickups, Transit commercial vans, and selected imported vehicles like the Bronco Sport and Mustang Mach 1.
The company’s International Markets Group delivered another solid quarter, leveraging its strengths with Ranger pickups and Everest SUVs.
In addition to the new collaboration with Argo AI and Lyft, Ford’s Mobility business expects to benefit from Argo’s recent introduction of its own Lidar technology. Farley said capabilities of the Argo Lidar are expected to enable the expansion of autonomous-vehicle services beyond dense urban areas, in the process creating a competitive advantage for Argo and Ford.
Ford Credit delivered record quarterly earnings before taxes of $1.6 billion. Among new capabilities inspired by Ford+, the business is launching Ford Pro FinSimple to provide commercial customers with bundled financing for vehicles, services and EV charging.
Outlook
Lawler said that Ford has raised its expectation for full-year adjusted EBIT by about $3.5 billion, to between $9 billion and $10 billion. Volume is expected to increase by about 30% sequentially from the first to the second half of the year, driving an improvement in market factors net of production costs.
The volume benefit is anticipated to be offset by higher commodity costs, investments in the Ford+ plan and lower earnings by Ford Credit, among other factors, with second-half adjusted EBIT lower than in the first half. The half-to-half comparison is also affected by a $902 million non-cash gain on Ford’s investment in Rivian that was booked in first-quarter 2021.
Additionally, the company has lifted its target for full-year adjusted free cash flow to between $4 billion and $5 billion, supported by expected favorable second-half working capital as vehicle production increases with anticipated improvement in availability of semiconductors.
Ford plans to report its third-quarter 2021 financial results on Oct. 27.
# # #
About Ford Motor Company
Ford Motor Company (NYSE: F) is a global company based in Dearborn, Michigan, that is committed to helping build a better world, where every person is free to move and pursue their dreams. The company’s Ford+ plan for growth and value creation combines existing strengths, new capabilities and always-on relationships with customers to enrich experiences for and deepen the loyalty of those customers. Ford designs, manufactures, markets and services a full line of connected, increasingly electrified passenger and commercial vehicles: Ford trucks, utility vehicles, vans and cars, and Lincoln luxury vehicles. The company is pursuing leadership positions in electrification, connected vehicle services and mobility solutions, including self-driving technology, and provides financial services through Ford Motor Credit Company. Ford employs about 182,000 people worldwide. More information about the company, its products and Ford Motor Credit Company is available at corporate.ford.com.
Conference Call Details
Ford Motor Company (NYSE: F) and Ford Motor Credit Company released their 2021 second-quarter financial results at 4:05 p.m. ET on Wednesday, July 28. Following the release, Jim Farley, Ford president and chief executive officer; John Lawler, Ford chief financial officer; and Marion Harris, CEO, Ford Motor Credit, will host a conference call at 5:00 p.m. ET to discuss the results. The presentation and supporting materials will be available at shareholder.ford.com. Representatives of the investment community will have the opportunity to ask questions on the call.
Ford Second-Quarter Earnings Call: Wednesday, July 28, at 5:00 p.m. ET
Toll-Free: 877.870.8664
International: +1.970.297.2423
Passcode: Ford Earnings
Web: shareholder.ford.com
Replay
Available after 8:00 p.m. ET on July 28 and through Aug. 4
Web: shareholder.ford.com
Toll-Free: 855.859.2056
International: +1.404.537.3406
Conference ID: 7590793
The following applies to the information throughout this release:
- See tables later in this release for the nature and amount of special items, and reconciliations of the non-GAAP financial measures designated as “adjusted” to the most comparable financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).
- Wholesale unit sales and production volumes include Ford brand and Jiangling Motors Corporation (“JMC”) brand vehicles produced and sold in China by our unconsolidated affiliates; revenue does not include these sales. See materials supporting the July 28, 2021, conference call at shareholder.ford.com for further discussion of wholesale unit volumes.
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