Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Company — Q2 2018 Earnings Presentation
62 slides from Ford Mtr Co Del's earnings presentation, Jul 25, 2018
Slide 1: 2Q Earnings Review
2Q Earnings Review July 25, 2018
Slide 2: Smart Choices for Value Creation
Smart Choices for Value Creation Our Freedom of movement drives human progress. Belief Our To become the world’s most trusted mobility company, Aspiration designing smart vehicles for a smart world. Passion for Product & Deep Customer Insight Our Plan Winning Propulsion Autonomous Mobility Portfolio
Slide 3: Winning Portfolio – Capital Focused on High-Margin, High-Growth Businesses
Winning Portfolio – Capital Focused on • Roadmap for potential High-Margin, High-Growth Businesses EBIT charges of $11B with ROIC (%) HIGHLY ACCRETIVE + cash-related effects of $7B over North Circle size = 2017 +/- EBIT (Bils) the next 3 to 5 years America 30% ~100% of − North America strong – Compa
Slide 4: Smart Choices For Growth
Smart Choices For Growth Business model redesign – optimize product portfolio and geographic footprint: • Reallocation of capital to higher return opportunities Winning • Potential restructuring EBIT charges of $11 billion with cash-related effects of $7 billion over Portfolio the next 3 to 5 year
Slide 5: Ford Autonomous Vehicles LLC
Ford Autonomous Vehicles LLC • Singular focus on commercial deployment of AV business in 2021 MOVING PEOPLE SELF-DRIVING & GOODS SYSTEM • Brings together teams that have DISPATCH & been focused on AV over the ROUTING last 18 months DATA FROM VEHICLE − Includes majority stake in AV LLC VEHICLE INTEGR
Slide 6: Execution On Value Creation
Execution On Value Creation • Fitness improving across portfolio – more benefits to come • Smart Choices and Business Model Redesign − North America – underlying trajectory supports 10% EBIT margin target − Europe and China performance – swiftly addressing misalignment of product mix, go-to-market c
Slide 7: Financial Review
Bob Shanks Chief Financial Officer Financial Review
Slide 8: Company Key Metrics Summary
Company Key Metrics Summary • 2Q top line lower YoY due to lower volume, mainly Meridian fire SECOND QUARTER YEAR TO DATE disruption in NA and China 2017 2018 H / (L) 2017 2018 H / (L) performance Wholesales (000) 1,651 1,493 (10) % 3,354 3,155 (6) % • Net income at $1.1B, down $0.9B Market share (P
Slide 9: Company Key Financial Metrics
Company Key Financial Metrics Company Revenue (Bils) Company Adjusted EBIT Margin (Pct) Excluding Meridian, Takata and Pivotal IPO 7.0% $42.0 6.3% 6.0% $39.9 $41.3 $40.4 4.9% 5.2% $36.5 $38.9 4.3% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Company Adjusted EBIT (
Slide 10: 2Q 2018 Company Revenue YoY Bridge
2Q 2018 Company Revenue YoY Bridge (Bils) • Company revenue down slightly • Lower volume driven primarily by Meridian disruption and China consolidated operations • Favorable mix primarily reflects market shift to SUVs and trucks in NA • Net pricing favorable in all regions except AP Net 2Q 2017 Vol
Slide 11: 2Q 2018 Company Results
2Q 2018 Company Results (Mils) $1,692 • Auto and Ford Credit results $1,157 drove Company adjusted EBIT $1,066 $645 • Mobility results include strategic investments in autonomous vehicle development $71 • Corporate Other includes $(42) $(181) gains on marketable securities, $(301) $(283) including P
Slide 12: 2Q 2018 Automotive EBIT By Region
2Q 2018 Automotive EBIT By Region (Mils) $1,753 $1,157 • Automotive EBIT driven by NA • Operations outside NA at an EBIT loss in total, down $659M $(596) YoY, driven by AP (China) and Europe $49 • NA EBIT YoY decline caused $(73) $(178) by Meridian disruption $(394) • MEA delivers record 2Q EBIT Nor
Slide 13: Automotive Key Metrics
Automotive Key Metrics • All metrics down YoY except SECOND QUARTER YEAR TO DATE SAAR 2017 2018 H / (L) 2017 2018 H / (L) • 2Q global SAAR up 4%; all Global SAAR (Mils) 93.8 97.6 4 % 91.5 96.5 5 % regions higher with the largest increase in AP, mainly India Market Share (Pct) 7.3 % 6.7 % (0.6) ppts
Slide 14: Automotive 2Q 2018 EBIT YoY Bridge
Automotive 2Q 2018 EBIT YoY Bridge (Mils) • EBIT down $1.2B YoY due to the Meridian disruption and Exchange $(284) China JVs (192) China Parts & Accessories 95 Other 98 • Positive pricing across all regions except AP Industry $ 276 Share (379) • Pressure from commodity cost Stocks (663) and exchange
Slide 15: North America Key Metrics
• 2Q NA and U.S. SAAR up 1% North America Key Metrics and 2% YoY, respectively SECOND QUARTER YEAR TO DATE • NA market share lower due to 2017 2018 H / (L) 2017 2018 H / (L) U.S. rental and other fleet SAAR (Mils) 21.2 21.4 1 % 21.3 21.5 1 % • Lower wholesale volume mainly driven by Meridian disrupt
Slide 16: North America 2Q 2018 EBIT YoY Bridge
North America 2Q 2018 EBIT YoY Bridge (Mils) • NA EBIT down $579M YoY due to the Meridian fire disruption • Positive market factors despite impact of Meridian • Actively driving performance on our leading, high-margin Meridian $(591) Industry 174 products and seeing positive Share (243) effects on m
Slide 17: North America – Focusing Capital On High-Margin, High-Growth Businesses
North America – Focusing Capital On High-Margin, High-Growth Businesses ROIC (%) HIGHLY ACCRETIVE + High • High-performing business Circle size = 2017 +/- EBIT (Bils) Performing supported by strong competitive 60% position 50% ~125% of NA EBIT • Targeting 10% EBIT margin 40% through fitness improvem
Slide 18: South America Key Metrics
South America Key Metrics • 2Q top-line metrics mixed YoY; SECOND QUARTER YEAR TO DATE financial metrics about flat 2017 2018 H / (L) 2017 2018 H / (L) • SA SAAR up 7%; Brazil up for SAAR (Mils) 4.2 4.5 7 % 4.0 4.6 15 % 5th consecutive quarter – Brazil 2.3 2.5 9 % 2.2 2.5 14 % largely concentrated i
Slide 19: South America 2Q 2018 EBIT YoY Bridge
South America 2Q 2018 EBIT YoY Bridge (Mils) • SA EBIT about flat YoY • Positive market factors offset Commodities $(48) the adverse impact of Other Inflationary Costs (91) exchange, commodities and Other 19 Exchange $(144) other inflationary costs Other 47 Volume / Net 2Q 2017 Mix Pricing Cost Othe
Slide 20: South America – Focusing Capital On High-Margin, High-Growth Businesses
South America – Focusing Capital On High-Margin, High-Growth Businesses ROIC (%) HIGHLY ACCRETIVE + Circle size = 2017 +/- EBIT (Mils) 50% • Profitability in the region limited 40% to Ranger, select SUVs and imports; returns weak 30% • Most of SA business low 20% performing 10% Profitable • Signific
Slide 21: Europe Key Metrics
Europe Key Metrics • 2Q top-line metrics mixed YoY; SECOND QUARTER YEAR TO DATE financial metrics down 2017 2018 H / (L) 2017 2018 H / (L) • Europe SAAR up 4% SAAR (Mils) 20.7 21.6 4 % 20.6 21.6 5 % • Europe market share down Market Share (Pct) 7.2 % 7.0 % (0.2) ppts 7.6 % 7.3 % (0.3) ppts primarily
Slide 22: Europe 2Q 2018 EBIT YoY Bridge
Europe 2Q 2018 EBIT YoY Bridge (Mils) Commodities $ (25) Other Contribution Cost (120) Structural Cost 6 • Europe EBIT down $195M YoY due to higher cost, primarily regulatory related, and Exchange $(106) unfavorable exchange, mainly Other 17 sterling $(139) • Favorable market factors more than expla
Slide 23: Europe – Focusing Capital On High-Margin, High-Growth Businesses
Europe – Focusing Capital On High-Margin, High-Growth Businesses ROIC (%) HIGHLY ACCRETIVE • High-performing business Circle size = 2017 +/- EBIT (Bils) + supported by strong competitive 80% High Performing >200% of position and profit / return pillars – Europe’s EBIT commercial vehicles, Ranger, Ku
Slide 24: Middle East & Africa Key Metrics
Middle East & Africa Key Metrics • 2Q top-line metrics mixed YoY; SECOND QUARTER YEAR TO DATE financial metrics improved 2017 2018 H / (L) 2017 2018 H / (L) • SAAR up 11%; flat in markets SAAR (Mils) 3.6 4.0 11 % 3.7 3.9 5 % where we participate Market Share (Pct) 3.4 % 2.5 % (0.9) ppts 3.6 % 2.9 %
Slide 25: Middle East & Africa 2Q 2018 EBIT YoY Bridge
Middle East & Africa 2Q 2018 EBIT YoY Bridge (Mils) • MEA EBIT a 2Q record • Favorable market factors and exchange drove the $98 million EBIT improvement Volume / Net 2Q 2017 Mix Pricing Cost Other 2Q 2018 Market Factors $74 25
Slide 26: Asia Pacific Key Metrics
Asia Pacific Key Metrics • All metrics lower YoY except SECOND QUARTER YEAR TO DATE SAAR; China the key driver 2017 2018 H / (L) 2017 2018 H / (L) • AP SAAR up 2.1M units; China SAAR (Mils) 44.1 46.2 5 % 41.7 45.0 8 % up 0.9M units China 27.6 28.5 3 % 25.4 27.5 8 % • AP market share lower due to Mar
Slide 27: Asia Pacific 2Q 2018 EBIT YoY Bridge
Asia Pacific 2Q 2018 EBIT YoY Bridge (Mils) • AP EBIT down $561M YoY – $506M in China and $55M in other markets China JVs $(192) • Market factors unfavorable due Exchange (37) mainly to China consolidated Other (1) operations; reflects lower volume and mainly industry-related net Industry $ 9 pricin
Slide 28: China 2Q 2018 EBIT YoY Bridge
China 2Q 2018 EBIT YoY Bridge (Mils) • 2Q China operations an EBIT loss of $483M, offset partially by EBIT of $89M in rest of AP • EBIT margin for markets outside China at 4.2% • China EBIT down $506M YoY • Unfavorable market factors primarily due to stock reductions for Explorer and Lincoln MKC, ta
Slide 29: Asia Pacific – Focusing Capital On High-Margin, High-Growth Businesses
Asia Pacific – Focusing Capital On High-Margin, High-Growth Businesses • Asia Pacific’s high-performing business diverse, including HIGHLY ACCRETIVE Ranger and most SUVs Circle size = 2017 +/- EBIT (Bils) ROIC (%) + • Low-performing business mainly 60% High Performing Lincoln and small cars 50% 40%
Slide 30: Mobility Key Metrics And 2Q 2018 EBIT YoY Bridge
Mobility Key Metrics And 2Q 2018 EBIT YoY Bridge (Mils) Key Metrics SECOND QUARTER YEAR TO DATE 2017 2018 H / (L) 2017 2018 H / (L) EBIT (Mils) $ (63) $ (181) $ (118) $ (127) $ (283) $ (156) • Mobility EBIT reflects increased investment in mobility services and AV development 2Q 2018 EBIT YoY Bridge
Slide 31: Ford Credit Key Metrics
Ford Credit Key Metrics SECOND QUARTER YEAR TO DATE 2017 2018 H / (L) 2017 2018 H / (L) • Strong 2Q EBT Net Receivables (Bils) $ 135 $ 143 6 % $ 135 $ 143 6 % Managed Receivables* (Bils) $ 142 $ 151 7 % $ 142 $ 151 7 % • Receivables up globally YoY led Loss-to-Receivables** (LTR) 46 bps 36 bps (10)
Slide 32: Ford Credit 2Q 2018 EBT YoY
Ford Credit 2Q 2018 EBT YoY (Mils) • Ford Credit EBT up $26M YoY • Volume and mix higher due to global receivables growth Residual Losses $32 Supplemental Depreciation 56 • Higher auction values drove Derivatives Market Valuation $(95) lease residual improvement Operating Costs & Other (30) • Unfavo
Slide 33: Ford Credit U.S. Automotive Financing Trends
Ford Credit U.S. Automotive Financing Trends Lease Share of Retail Sales (Pct) Lease Return Vol. (000) and Auction Values** Ford Credit Industry* 36-Month Return Volume $18,190 $17,705 • 2Q lease share about the same $17,440 $17,385 $17,350 31% 30% 31% 30% $17,130 as prior year and below industry 28
Slide 34: Company Cash Flow
Company Cash Flow (Bils) SECOND QUARTER YEAR TO DATE 2017 2018 2017 2018 Company Adjusted EBIT* $ 2.8 $ 1.7 $ 5.3 $ 3.9 Excluding: Ford Credit EBT (0.6) (0.7) (1.1) (1.3) Subtotal $ 2.2 $ 1.0 $ 4.2 $ 2.6 Capital spending $ (1.5) $ (1.9) $ (3.2) $ (3.7) • 2Q cash flow negative due to Depreciation and
Slide 35: Company Balance Sheet And Liquidity
Company Balance Sheet And Liquidity (Bils) 2017 2018 Dec 31 Jun 30 Company excl. Ford Credit Company Cash* $ 26.5 $ 25.2 Liquidity 37.4 36.1 • Company cash and liquidity Debt $ 16.5 $ 16.2 balances remain strong Cash Net of Debt 10.0 9.0 • Extended maturity dates of Company Balance Sheet Underfunded
Slide 36: 2018 FY Outlook
2018 FY Outlook Company Business Units Key Metric 2018 Guidance Region / Segment 2018 EBIT Guidance Modestly higher than Automotive Lower than 2017 due to Asia Pacific and Europe Revenue 2017 North America Lower than 2017 Adjusted EPS* $1.30 - $1.50** South America Improved from 2017 Adj. Operating
Slide 37: Company Adjusted EPS Guidance Bridge
Company Adjusted EPS* Guidance Bridge Market Factors $ 0.21 Commodities (0.11) Other (0.02) Market Factors $(0.10) Cost (0.06) Exchange / Other (0.04) Market Factors $(0.16) JV Net Equity Income (0.11) Tariffs (0.04) Other 0.07 Prior Revised Guidance Tax Rate Guidance Midpoint Change North America E
Slide 38: North America Highlights
North America Highlights MERIDIAN FIRE RESPONSE QUALITY UNITED STATES J.D. POWER INITIAL QUALITY STUDY Ford led as America’s best-selling brand of combined trucks and SUVs Ford achieved best-ever score in 2018 F-Series sales topped 236,000 units in 2Q and are 5th straight year of improvement on a re
Slide 39: Europe – Focus On Fitness
Europe – Focus On Fitness • CVs remain the cornerstone of Europe business and strategy – continued strong 2Q performance Commercial • Ford brand #1 in European 2Q CV sales – sales up 11%; share up from 12.8% to 13.2% Vehicles • Transit top-selling CV nameplate; Ranger #1 pickup • Fiesta launch succe
Slide 40: China Deep Dive – Structural And Go-To-Market Issues
China Deep Dive – Structural And Go-To-Market Issues Dealers • Actions to improve dealer support and profitability executed end 2Q Disengaged • High dealer stock levels being addressed aggressively Uncompetitive • Localize assembly of Explorer and Lincoln (starting with new Small Utility early 2020)
Slide 41: Questions & Answers
Questions & Answers
Slide 42: Smart Choices for Value Creation
Smart Choices for Value Creation Our Freedom of movement drives human progress. Belief Our To become the world’s most trusted mobility company, Aspiration designing smart vehicles for a smart world. Passion for Product & Deep Customer Insight Our Plan Winning Propulsion Autonomous Mobility Portfolio
Slide 43: Cautionary Note On Forward-Looking Statements
Cautionary Note On Forward-Looking Statements Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptio
Slide 44: Appendix
APPENDIX SUPPLEMENTAL DATA Shareholder Distributions A1 Return on Invested Capital A2 Special Items A3 U.S. Transaction Prices, Incentives and Days Supply A4 Revised Reporting – 2017 A5 Revised Reporting – ROIC A6 1Q China YoY EBIT Bridge A7 RECONCILIATIONS TO GAAP Adjusted EBIT A8 Adjusted EBIT 201
Slide 45: Shareholder Distributions
Shareholder Distributions (Bils) Supplemental Dividend $18.3 Anti-Dilutive Share Repurchases Regular Dividends $1.7 $2.8 • 2018 planned distributions of $3B for a total of $18.3B for 2012 - 2018 • Paid a second quarter regular dividend of 15¢ per share $13.8 $3.5 $2.7 $3.0 $2.3 $1.0 $0.6 $2.4 $2.4 $
Slide 46: Return On Invested Capital Calculation
Return On Invested Capital Calculation (Bils) Four Quarters Four Quarters Ending 2Q 2017 Ending 2Q 2018 Net Operating Profit After Tax (NOPAT) (Bils.) (Bils.) Net income attributable to Ford $ 3.8 $ 6.9 Add: Non-controlling interest 0.0 0.0 Less: Income tax (0.9) 0.0 Add: Cash taxes (0.7) (0.6) Less
Slide 47: Company Special Items
Company Special Items (Mils) 2Q YTD Memo: 2017 2018 2017 2018 FY 2017 Pension and OPEB Gain / (Loss) Year end net pension and OPEB remeasurement loss $ - $ - $ - $ - $ (162) Other pension remeasurement gain - - - 26 - Pension curtailment gain - - - 15 354 Separation-Related Actions (7) (42) (29) (51
Slide 48: U.S. Transaction Prices, Incentives and Days Supply
U.S. Transaction Prices, Incentives and Days Supply Second Quarter Ford Industry YoY average transaction price (USD)* $ 837 $ 797 YoY incentive change as pct. of vehicle price* 0.5 0.1 U.S. gross days supply 78 68 * Source: J.D. Power PIN ISR data – cash / APR / lease (blended) transaction; industry
Slide 49: Revised Reporting – 2017
Revised Reporting – 2017 (Mils) 2017 1Q 2Q 3Q 4Q Full Year North America $ 2,130 $ 2,332 $ 1,824 $ 1,771 $ 8,057 South America (237) (177) (150) (189) (753) Europe 209 122 (53) 89 367 Middle East & Africa (75) (49) (56) (66) (246) Asia Pacific 148 167 314 30 659 Automotive $ 2,175 $ 2,395 $ 1,879 $
Slide 50: Revised Reporting – ROIC
Revised Reporting – ROIC (Bils) 2013 2014 2015 2016 2017 Net Operating Profit After Tax (NOPAT) Net income attributable to Ford $ 11.9 $ 1.3 $ 7.3 $ 4.6 $ 7.7 Add: Non-controlling interest (0.0) (0.0) (0.0) 0.0 0.0 Less: Income tax (2.4) (0.0) (2.9) (2.2) (0.4) Add: Cash taxes (0.5) (0.5) (0.6) (0.7
Slide 51: China 1Q 2018 EBIT YoY Bridge
China 1Q 2018 EBIT YoY Bridge (Mils) Net Equity Income $(136) Royalties (43) Volume / Net 1Q 2017 Mix Pricing Cost JVs Other 1Q 2018 Market Factors $(75) Other Markets $101 $(21) $(21) $15 $31 $(74) $31 51 A7
Slide 52: Company Net Income Reconciliation To Adjusted EBIT
Company Net Income Reconciliation To Adjusted EBIT (Mils) 2Q YTD Memo: 2017 2018 2017 2018 FY 2017 Net income / (Loss) attributable to Ford (GAAP) $ 2,047 $ 1,066 $ 3,639 $ 2,802 $ 7,731 Income / (Loss) attributable to non-controlling interests 8 3 15 12 26 Net income / (Loss) $ 2,055 $ 1,069 $ 3,65
Slide 53: Company 2018 Net Income Reconciliation To Adjusted EBIT
Company 2018 Net Income Reconciliation To Adjusted EBIT (Mils) 2018 1Q 2Q Net income / (Loss) attributable to Ford (GAAP) $ 1,736 $ 1,066 Income / (Loss) attributable to non-controlling interests 9 3 Net income / (Loss) $ 1,745 $ 1,069 Less: (Provision for) / Benefit from income taxes (174) (280) In
Slide 54: Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share
Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share 2Q YTD 2017 2018 2017 2018 Diluted After-Tax Results (Mils) Diluted after-tax results (GAAP) $ 2,047 $ 1,066 $ 3,639 $ 2,802 Less: Impact of pre-tax and tax special items (202) (33) (193) (14) Adjusted net income – diluted (Non
Slide 55: Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate
Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate 2018 Memo: 2Q YTD FY 2017 Pre-Tax Results (Mils) Income / (Loss) before income taxes (GAAP) $ 1,349 $ 3,268 $ 8,159 Less: Impact of special items (42) (19) (289) Adjusted earnings before taxes (Non-GAAP) $ 1,391 $ 3,287 $ 8,448
Slide 56: Net Cash From Operating Activities Reconciliation To Adjusted Operating Cash Flow
Company Net Cash Provided By / (Used in) Operating Activities Reconciliation To Adjusted Operating Cash Flow (Mils) 2Q YTD 2017 2018 2017 2018 Company net cash provided by / (used in) operating activities (GAAP) $ 5,615 $ 4,972 $ 9,951 $ 8,486 Less: Items Not Included in Company Adjusted Operating C
Slide 57: Reconciliation To Adjusted Operating Cash Flow Trailing Five Quarters
Reconciliation To Adjusted Operating Cash Flow Trailing Five Quarters (Mils) 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Company net cash provided by / (Used in) operating activities (GAAP) $ 5,615 $ 4,998 $ 3,147 $ 3,514 $ 4,972 Less: Items Not Included in Company Adjusted Operating Cash Flows Ford Cre
Slide 58: Ford Credit Total Net Receivables Reconciliation To Managed Receivables
Ford Credit Total Net Receivables Reconciliation To Managed Receivables (Bils) 2016 2017 2017 2018 Dec 31 Jun 30 Dec 31 Jun 30 Ford Credit finance receivables, net (GAAP)* $ 96.2 $ 101.4 $ 108.4 $ 107.7 Net investment in operating leases (GAAP)* 27.2 26.7 26.7 27.3 Consolidating adjustments** 6.8 6.
Slide 59: Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage
Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage (Bils) 2017 2017 2018 Jun 30 Dec 31 Jun 30 Leverage Calculation Total debt* $ 129.3 $ 137.8 $ 136.7 Adjustments for cash** (10.1) (11.8) (10.7) Adjustments for derivative accounting*** (0.2) - 0.5 Total adjusted debt $ 119.0
Slide 60: Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measures That Supplement GAAP Measures We use both GAAP and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. The non-GAAP measures listed below are intended to be considered by users as supplemental
Slide 61: Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measures That Supplement GAAP Measures • Company Adjusted Operating Cash Flow (Most Comparable GAAP Measure: Net Cash Provided By / (Used In) Operating Activities) – Measure of Company’s operating cash flow excluding Ford Credit’s operating cash flows. The measure contains element
Slide 62: Definitions And Calculations
Definitions And Calculations Automotive Records • References to Automotive records for EBIT margin and business units are since at least 2009 Wholesales and Revenue • Wholesale unit volumes include all Ford and Lincoln badged units (whether produced by Ford or by an unconsolidated affiliate) that ar