Ford Motor Co reported a lower-than-expected fourth-quarter profit on Friday as commodity costs shot up and results from operations outside North America fell short of expectations.
The No. 2 US automaker's losses in Europe nearly quadrupled during the quarter as the economy suffered amid the ongoing debt crisis. Flooding in Thailand led to a loss in Asia, and increased competition blunted profits in South America.
"We saw the external environment deteriorate, and that really affected most regions other than North America," Chief Financial Officer Lewis Booth told reporters, "and then we saw slightly greater than we expected impact of commodities, currency and also the Thai floods."
Shares of Ford, which derives the bulk of its revenue from North America, fell more than 5% in pre-market trading.
Excluding one-time items, Ford's operating profit fell to $1.1 billion, or 20 cents per share, from nearly $1.3 billion, or 30 cents per share, a year earlier.
On that basis, analysts on average were expecting 25 cents per share, according to Thomson Reuters I/B/E/S.
"It's been a tough go for Ford," said portfolio manager Gary Bradshaw of Hodges Capital Management of Dallas, which owns Ford shares. "It seems like the company continues to execute, but there are plenty of headwinds."
Besides higher commodity costs, Ford also said it missed expectations because of unfavorable exchange rates.
Profit margins in Ford's automotive business fell to 5.4% in 2011 from 6.1% in 2010. Commodity costs for the year came to $2.3 billion, up slightly from the company's $2.2 billion forecast.
NOT IMMUNE TO EUROPE
Ford's losses in Europe widened to $190 million in the fourth quarter from $51 million a year earlier. In South America, the company's pre-tax operating profit fell to $108 million from $281 million.
Ford posted a quarterly loss of $83 million in Asia, compared with a year-earlier profit of $23 million. The company flagged the loss in Asia earlier this month.
Booth said he expected Ford to be "modestly profitable" in Asia in 2012, but he did not provide a forecast for Europe, where he said rivals have piled on incentives to sell vehicles. Ford expects European growth will be tempered by the debt crisis and austerity measures in 2012.
Compared with Detroit rival General Motors, Ford is less exposed to Europe, Jefferies analyst Peter Nesvold said.
"Ford won't be immune to a downturn in Europe, but I think the product lineup is a little bit fresher and a little bit better, and it's a smaller piece of the overall pie," said Nesvold, who has a "buy" rating on Ford. "Europe is less of an anchor for Ford's shares than it is potentially for GM's shares."
For the fourth quarter, Ford reported net income of $13.6 billion, or $3.40 per share, buoyed by a one-time tax-related gain of $12.4 billion. Net income was $190 million, or 5 cents per share, a year earlier.
The higher net income was the result of an accounting change that Ford said reflects confidence in its long-term profit outlook. The one-time gain resulted in full-year net income of $20.2 billion, the highest since 1998.