DETROIT (Reuters) - General Motors Co (GM.N) on Wednesday lowered its full-year 2018 earnings forecast, citing higher steel and aluminum costs, sending its shares down more than 3 percent in pre-market trading.
FILE PHOTO: The GM logo is seen at the General Motors Warren Transmission Operations Plant in Warren, Michigan, U.S., October 26, 2015. REUTERS/Rebecca Cook/File Photo
The No. 1 U.S. automaker said it would be able to partially offset higher commodity costs and the unfavorable effect of currency fluctuations in Brazil and Argentina, but they would have a net impact of around $1 billion on the company’s full-year results. Previously GM had expected those costs would total around $500 million.
“Our operating performance was impacted by significant headwinds from commodity costs and currency devaluations in South America,” GM Chief Financial officer Chuck Stevens said in a statement, where he described a “more challenging environment” for the rest of the year.
The automaker buys most of its steel from U.S. producers, who have raised prices in reaction to tariffs on imported steel imposed by the Donald Trump administration earlier this year.
GM also said the higher costs would reduce its adjusted automotive free cash flow by around $1 billion to $4 billion versus its previous expectation of $5 billion.
GM said that it now expects to earn around $6 per share, down from its previous earnings-per-share forecast of $6.30 to $6.60.
The profit forecast change came as GM posted a better-than-expected second-quarter net profit, despite falling versus the same quarter in 2017.
The Detroit automaker reported quarterly net income of $2.39 billion, or $1.81 a share, compared with $2.43 billion, or $1.89 a share, last year. Analysts, on average, had expected earnings of $1.78 a share.
Revenue in the quarter was down slightly at $36.76 billion from $36.98 billon. Analysts had expected $36.73 billion.
In pre-market trading, GM shares were down 3.3 percent at $38.20.
Reporting by Nick Carey and Ben Klayman; Editing by Adrian Croft and Nick Zieminski
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