JLR Pulls Tata Motors Down Into A Loss Of Rs. 1902 Crore In First Quarter

Indian automaker Tata Motors reported a consolidated net loss of Rs. 1902.4 crore in the first quarter of FY2019. The company had posted a net profit of Rs. 3199 crore during the same quarter last year. The company announced that it was hit by losses at its UK subsidiary Jaguar Land Rover (JLR) and higher raw material costs. This is the company's first quarterly loss in three years. The luxury brand reported a loss of 210 million Pounds (around Rs. 1900 crore) between April and June 2018, which was attributed to a number of factors primarily being the duty reduction in China last month, and diesel concerns in the UK and Europe.

Speaking on the performance of JLR during the previous quarter, Tata Motors, Chairman, Natarajan Chandrasekaran commented, "With regards to JLR, we faced multiple challenges including temporary issues like China duty impact as well as the market issues like diesel concerns in UK and Europe. Despite these challenges, we remain committed to deliver the planned margins we outlined earlier this year and appreciate the urgency to address our challenges with speed. Towards this, we will step up all round execution. We will leverage our product portfolio to grow faster and drive down costs to improve operating leverage of the business. We will also calibrate our capital spends to minimise cash outflow.'

Meanwhile, Tata Motors recorded robust performance in sale of passenger and commercial vehicles in India. The automaker registered a net profit of Rs. 1187.65 crore through the June quarter, up from a loss of Rs. 463.14 crore recorded during the previous quarter in FY2018. Sales climbed by 63 per cent to Rs. 16,592.33 crore. The Indian auto giant posted a revenue of Rs. 65,975.78 crore in Q1 of FY2019, a growth of 12.2 per cent when compared to the revenue of Rs. 58,755.07 crore that was recorded during the same period last year.

Commenting on the domestic business and its growth, Chandrasekaran said, "I am delighted with the progress made by the domestic business on their 'Turnaround 2.0' strategy. We continue to gain market share while strongly improving profitability in both Commercial Vehicles and Passenger Vehicles. Our drive for increased transparency continues with separate segmental results for CV and PV businesses from this quarter. I believe that with our focused efforts we are well positioned to "Win Decisively" in CV and "Win Sustainably" in PV. With these focused efforts, I am confident that Tata Motors Group will deliver Competitive, Consistent and Cash Accretive Growth in the medium to long term"

For Jaguar Land Rover, retail sales in the first quarter of FY2019 grew by 5.9 per cent year-on-year to 145,510 units. The growth in volumes was contributed by strong sellers including the Range Rover Velar, Range Rover Sport, Land Rover Discovery and the new Jaguar E-Pace. Sales in China, however, took a hit with wholesales being 13,510 units lower than retail sales, reflecting the reduction in import duties from 25 per cent to 10 per cent on July 1, 2018, and planned dealer stock reduction in other markets.

Revenues for JLR for Q1 stood at 5.2 billion Pounds (around Rs. 4673 crore), a decline of 6.7 per cent as compared to the same period last year. The drop season attributed to the lower wholesales and increased incentives in China in advance of the July 1 reduction. This made for an unfavourable balance sheet currency revaluation and higher depreciation and amortisation resulting from continuing investment led to a pre-tax loss for the quarter of 264 million Pounds (negative EBIT margin). Earnings before interest, tax and depreciation (EBITDA) were 325 million Pounds (around Rs. 2922 crore) (6.2 per cent margin).

Jaguar Land Rover Chief Executive, Ralf Speth said, "We had a pre-tax loss in the first quarter, reflecting the impact of the announcement of the duty reduction in China as well as planned dealer stock reduction in the quarter. We also continue to be impacted negatively by uncertainty over diesels in Europe along with Brexit and additional diesel taxes in UK. Given these issues, we will remain focused on driving growth and simultaneously reducing costs and boosting operational efficiency and capability, taking the necessary steps to shape our future. We expect sales and financial results to improve over the remainder of the financial year, driven by continued ramp-up of new models, most recently the electric Jaguar I-Pace, and with the new lower duties effective in China".

That said, JLR continues to invest in new vehicles and technologies that will be supporting its future growth with an investment of 1.1 billion Pounds (around Rs. 989 crore) for the quarter. This investment spending and seasonal working capital outflows of 1 billion Pounds led to a negative operating cash flow of 1.7 billion Pounds. The automaker plans to invest around 4.5 billion Pounds in the current financial year. The company plans to achieve a profitability of 4-7 per cent at the end of the 2018-18 financial year as announced for the FY19-21 period.