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Ford warns profits set to fall as sales slow

Ford said that slowing new car demand in the US and rising costs could halve its first-quarter earnings per share compared with last year’s record first quarter.

The Detroit carmaker’s shares slipped in New York on Thursday after the company said in a statement that it now expects pre-tax profits of $9bn in 2017, down from $10.4bn last year. It expects profits to rise again in 2018.

Last September Ford warned that profits would fall this year as it ramps up investments in new technology.

Ford and other carmakers are investing heavily in new technologies, from self-driving cars to ride-sharing, depressing profits in the near term in a drive to prepare for dramatic changes in car ownership and usage patterns in future.

The company said last month it would invest $1bn over the next five years in a new driverless car unit Argo.

Bob Shanks, Ford chief financial officer, told an investor call that earnings per share in the first quarter would be $0.30 to $0.35, well below the market consensus of $0.47 and sharply lower than the $0.68 reported for the first quarter of 2016. In a regulatory filing, the company blamed higher costs, lower volume in fleet sales and unfavourable exchange rates. 

Ford has been predicting a dip in US new vehicle sales as the US car market hits a plateau after seven years of strong growth. Many industry analysts expect sales to fall slightly this year from an unexpectedly strong 17.6m in 2016, with purchases at the end of last year bolstered by optimism in the wake of the US presidential election. 

Stuart Pearson, auto analyst at Exane BNP Paribas, said Ford’s comments could exacerbate market concerns about US carmaker profits.

“Weaker than expected pricing data points at the start of 2017 has made investors incrementally more nervous on the profit outlook for the US post the strong Trump rally,” he wrote in a note.

“Ford’s comments will likely only add to these concerns. Although Ford is keeping [full-year] guidance unchanged, it would appear that they are increasingly dependent on [second-half] performance.”

Ford’s shares were down 0.7 per cent at $11.69 by midday in New York.

Via FT