Tata Motors reported ₹1,049 crore in consolidated losses for the quarter ended September 30, pulled down by Jaguar Land Rover’s (JLR) £101-million losses caused by a sharp decline in China sales. In the same quarter last year, Tata Motors had booked a profit of ₹2,483 crore.
Consolidated revenue from operations during the quarter increased 3.3 per cent YoY to ₹72,112 crore driven by domestic sales volumes.
At JLR, revenues for the quarter declined 10.9 per cent to £5.6 billion, 10.9 per cent lower YoY, primarily reflecting lower wholesales. The lower wholesales, combined with higher depreciation and amortisation led to a pre-tax loss for the quarter of £90 million. Earnings before interest, tax and depreciation (EBITDA) were £511 million (9.1 per cent margin).
“In JLR, market conditions, particularly in China, have deteriorated further,” said Tata Motors Chairman N Chandrasekaran. “To weather this volatile external scenario, we have launched a comprehensive turnaround plan to significantly improve our free cash flows and profitability. The leadership team at JLR is in mission mode to achieve the deliverables under this plan. With these concerted actions we remain committed to deliver an improved all-round performance from H2 FY19.”
While the Chinese car market went down by 7.7 per cent in the quarter, JLR sales dropped 6 times more to 43.8 per cent, forcing the company to pull back some of the inventory. The company said it needs to rework some structural issues in China such as fixing dealer profitability to drive sales.
“As we take these structural actions, we continue to remain focused on sustainable profitable growth. I am confident that Tata Motors Group is building the right business model and the requisite capabilities for delivering competitive, consistent and cash accretive growth in the medium to long term,” Chandrasekaran said.
To improve profitability and cashflow, JLR has launched two initiatives, called ‘Charge’ and ‘Accelerate’, to identify short-term cost and cash flow improvements as well as longer-term operating efficiencies.
Ralf Speth, JLR’s CEO, said: “Our results were undermined by slowing demand in China, along with continued uncertainty in Europe over diesel, Brexit and the WLTP changeover. Given these challenges, Jaguar Land Rover has launched far-reaching programmes to deliver cost and cashflow improvements of £2.5 billion over the next 18 months. Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable growth. We remain focused on delivering improved profitability and cashflow in the second half, while pressing ahead with our product offensive.”
The company has curtailed planned spending in FY19 and FY20 by £500 million to £4 billion.
Domestic growth
Tata Motors’ domestic operations were the silver lining. In Q2 FY19, its wholesales (including exports) grew 25 per cent to 190,283 units with broadbased growth across the entire portfolio.
M&HCV sales in the domestic market grew 23 per cent, and CV passenger sales grew 8 per cent. The commercial vehicle growth reflects strong product portfolio, higher economic activities due to the improved industrial activity, growth in e-commerce sector and continued government spending on infrastructure, it said. Private vehicle sales were up 18 per cent in the quarter with Nexon and Tiago continuing to deliver strong growths.
Tata Motors’ Q2 standalone revenue increased 33 per cent to ₹17,759 crore, pre-tax profit to ₹150 crore. Pre- tax profit for the quarter includes one-off charges of ₹209 crore and foreign currency revaluation loss of ₹249 crore. Profit after tax for the quarter was ₹109 crore.