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Ford earnings weighed down by Rivian stake

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Ford earnings weighed down by Rivian stake

Ford reported Wednesday a multi-billion dollar loss in the first-quarter due to a massive write-off on the value of its stake in Rivian. 

Shares still rose in after-hours trading as investors focused more on Ford’s fundamentals —including beating analysts’ estimates on revenue and adjusted earnings — and not its Rivian holding. 

Ford generated $34.5 billion in revenue in the first quarter of 2022. That beat analysts’ expectations of $31.2 billion worth of revenue, albeit falling from its year-ago result of $36.2 billion.

That Ford managed to beat revenue expectations but still lost so much money might surprise you. Investors were not shocked, with Ford reporting adjusted profits within a penny per share of estimates. Still, the car company lost $3.1 billion in GAAP terms in Q1, largely due to a write-off of the value of its stake in Rivian, an electric car company that has had a tumultuous life on the public markets.

Ford told investors that its quarterly net loss was “primarily attributable to a mark-to-market loss of $5.4 billion on the company’s investment in Rivian.” If the scale of the Rivian-induced hit to profitability surprises you, recall that the EV company’s stock crested at $179.47 per share according to Yahoo Finance data, before suffering from a decline to $31.22 today at the close of regular trading.

In simpler terms, the value of Ford’s stake in Rivian fell by more than half from $10.6 billion at the end of 2021 to just $5.1 billion as of the quarter ended March 31. Rivian’s stock has shed another double-digit percentage of its worth since that date, indicating that Ford could take another paper loss in the second quarter.

Past the company’s accounting-induced net loss, Ford earned $2.3 billion worth of adjusted EBIT (earnings before interest and taxes) according to its earnings report. 

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EVs and supply chain

Ford said it shipped 970,000 vehicles in the first quarter, down 9% from a year-ago as a continuing global shortage of semiconductors held down the automaker’s January and February production and shipments. Ford did cite “significantly improved” manufacturing rates during March, signaling that the second quarter numbers could improve. 

The company entered the second quarter with what Ford CEO Jim Farley called an “extremely healthy” order bank.

The automaker said it is on track to scale high-demand EVs to 600,000 units by the end of next year, and expects production to go ahead as scheduled for E-Transit vans in the U.S. and Europe, as well as the F-150 Lightning pickup in the U.S. 

Ford exceeded its previous record of electrified vehicle sales year-to-date with an increase of about 38%, according to its March U.S. sales report.

Ford’s EV ambitions are largely tied up in the success of the F-150 Lightning pickup truck, which went into production this week. The automaker said it has 200,000 reservations for the F-150, which has prompted the company to double its planned annual production to 150,000 vehicles in 2023. 

The demand for these new vehicles might help Ford achieve its goal for the year of significantly higher profits in North America and collective profitability worldwide. That is, if its hit from Rivian, combined with increasingly dire supply chain constraints, don’t hold the company back from hitting its production numbers. 

Guidance

Looking ahead, Ford reaffirmed its 2022 guidance of positive adjusted EBIT of $11.5 billion to $12.5 billion, alongside “adjusted free cash flow” of $5.5 billion to $6.5 billon; Ford closed the quarter with cash and equivalents worth $29 billion, and reported $45 billion in total liquidity inclusive of its Rivian stake.

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While Ford’s unit volume dipped in Q1 compared to the year-ago period, the company expects “vehicle wholesale volumes [to increase] 10% to 15% from 2021” by the end of the year. That unit volume figure includes a stated assumption of there being more chips available in the market by the back-half of 2022.

Ford is baking $4 billion worth of higher commodity costs in its estimates, along with what the company described as “ inflationary effects on a range of other expenses.”

Source: TechCrunch

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