- 26Oct
(Reuters) - Ford Motor Co posted a higher-than-expected quarterly profit on Tuesday and pulled forward by a year a debt-reduction forecast seen as key to returning the automaker to an investment-grade credit rating.
Ford, which expects to be solidly profitable this year, said it repaid $2 billion of debt in the third quarter, expects to pay down a debt to a union retiree healthcare trust fund on Friday, and has launched a convertible note offering to reduce its debt.
Ford shares, which touched a six-month high on Monday, were down 2.6 percent in premarket trade after the release of the earnings results and debt-reduction plans.
The automaker said it now expects cash on hand in its automotive business to at least match its debt by the end of 2010 -- a year ahead of a forecast it gave in July.
Ford, which posted losses totaling $30 billion from 2006 through 2008, borrowed $23.5 billion in late 2006 to support its turnaround, leaving it with much heavier debt loads than rivals General Motors Co and Chrysler.
Dearborn, Michigan-based Ford last had an investment-grade credit rating in May 2005. It has not been cash flow positive in its automotive business since the second quarter of 2008.
Third-quarter net profit rose to $1.7 billion, or 43 cents per share, from $997 million, or 29 cents per share, a year earlier. Excluding the Volvo unit it sold in August, revenue rose $1.7 billion to $29 billion.
Ford reported earnings of 48 cents per share excluding one-time items. On that basis, analysts on averaged expected 38 cents a share, according to Thomson Reuters I/B/E/S.
Ford's automotive business reported a $1.3 billion operating profit in the quarter. All regions except for Europe reported operating profits.
The Ford Credit finance arm reported a $766 million pretax profit.
Ford said that on Friday it will repay the remaining $3.6 billion of debt owed to a retiree healthcare trust for the United Auto Workers union.
On Tuesday, Ford launched offers for convertible notes due in 2016 and 2036. The offerings will not change the share count used to calculate earnings per share.
Excluding the convertible note offering, the automaker's debt reductions have totaled $10.8 billion in 2010, cutting its annual interest expense by nearly $800 million, Ford said.
The automaker said it expects all automotive regions to report profits in the fourth quarter and 2011. Ford expects total profit and automotive operating cash flow in 2011 to build on the gains from 2010.
Ford Credit is expected to be profitable in 2011, but at a lower level than in 2010, Ford said.
Ford shares were down 2.6 percent at $13.78 in premarket trade. They rose as high as $14.20 on Monday and closed at $14.15.
