Company overview
Ford Motor Company (NYSE:F) is involved in the development, manufacture, distribution, and service of vehicles, parts, and accessories. It operates in two areas: automobiles and financial services. The automobile sector offers vehicles under two brands, Ford and Lincoln. The financial sector provides automotive financing products, which include retail installment sale contracts for new and used vehicles, leases for new vehicles, etc.
Geographical spread
The company markets cars, trucks, parts, and accessories in different parts of the world through its retail dealers. North America is the biggest contributor to its revenue, followed by Europe.
Financial insight
Ford Motor Company (NYSE:F)’s revenue declined 1% in fiscal 2012. This was primarily due to the global economic slowdown to 2.5% growth in 2011 as compared to 4% in 2010. The Eurozone crisis also negatively impacted revenue growth. Amidst a slowdown and decline in revenue, the decline in EBITDA margin was marginal at 100 basis points for 2012.
In terms of cash-flow metrics, a positive operating cash flow and free cash flow enhance the liquidity position and also support the working capital requirements. High capital spending in fiscal 2012 and the first quarter of 2013 shows the company is aggressively improving the model mix and accelerating the development of new products, which the customers demand. High capital expenditures will translate into future revenue growth.
Overall, the fundamentals look healthy with steady revenue and EBITDA margin, positive cash flow and significant investments for future growth.
| $millions | 2012 | 2011 | 2010 | 2009 | 1Q13 | 1Q12 |
|---|---|---|---|---|---|---|
| Revenue | 134252 | 136264 | 128954 | 116283 | 35810 | 32445 |
| Growth in revenue | -1% | 6% | 11% | 225% | 10% | |
| EBITDA | 16752 | 17368 | 18669 | 16785 | 1774 | 1707 |
| EBITDA Margin | 12% | 13% | 14% | 14% | 5% | 5% |
| Net Income | 5665 | 20213 | 6561 | 2717 | 1611 | 1396 |
| OCF | 9045 | 9784 | 11477 | 15477 | 211 | 2075 |
| Capital expenditure | 5488 | 4293 | 4092 | 4059 | 1483 | 1093 |
| FCF | 3557 | 5491 | 7385 | 11418 | -1272 | 982 |
| Debt | 109258 | 99531 | 104019 | 131673 | 107356 | 105058 |
| Equity | 15947 | 15028 | -673 | 7820 | 17638 | 15989 |
Key investment positives
Innovation leader
Ford Motor Company (NYSE:F) has been issued 661 U.S utility patents in fiscal 2012 as compared to 444 in 2011. This increase in the number of patents is an indication of continued technological innovation, which will boost growth in the future. An important innovation to mention here is the set up of Changan Ford Engine Plant (CAFEP) which would raise engine production capacity by 400,000 units per year. Besides this, there are number of other innovations in the company’s kitty, which qualifies it to succeed in changing environment and satisfy the need of the investor.
Changing geographical mix
The company is focusing on high-growth countries like China, Russia, and Turkey, where the company expects to exceed overall industry growth.
An estimated increase in sales from 15% to 32% in the Asia Pacific and African regions is primarily because of increasing demand in China coming from rising incomes, a growing middle class and supportive industrial policies from the Chinese government. Moreover, the growth potential is expected to be high since per-capita car ownership is still low at 4.8%.
Ford Motor Company (NYSE:F)’s focus on changing the geographical mix and focusing on the Asia Pacific region is evident by the setup of Changan Ford Engine Plant (CAEFP) in China, which would more than double China’s engine production capacity. In line with the strategy of changing its geographical sales and production volumes, the company plans to close two U.K facilities in 2013. This will reduce vehicle assembly by 18%, leading to gross annual savings ranging between $450 million to $500 million.
