Ford has raised its 2021 profit outlook after posting stronger-than-expected financial results in the second quarter as volumes soared in North America versus year-ago levels.
The company reported an operating profit (adjusted EBIT) for the second quarter of $1.1bn, which compares with a loss of $1.9bn in the same quarter of last year.
Ford raised its anticipated full-year 2021 adjusted EBIT and adjusted free cash flow, respectively, to between $9 billion and $10 billion (up by $3.5bn) and between $4 billion and $5 billion.
It also said it is proceeding with rolling out its plan for the company’s future, ‘Ford+’, while managing through semiconductor supply shortages.
“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.”
Ford had previously 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 said it did better than expected, leveraging strong demand to optimize revenue and profits through lower incentives and a favourable mix of vehicles, to generate the operating profit of $1.1bn.
As demand recovery accelerated in the US, 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.
Ford said overall 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.