For the second consecutive
quarter, Jaguar Land Rover (JLR), due to an "unprecedented"
plunge in china volumes, continued to roil the finances of
Tata Motors, which Wednesday reported a net loss of Rs 1,009
crore for the September quarter.
The company had reported a net profit of Rs 2,501.7
crore in the year-ago period.
Total revenue from operations, however, rose 3.3 per
cent to Rs 72,112.08 crore, thanks to the robust show by the
domestic business and despite an 11 per cent decline in JLR
revenue to 5.6 billion pounds, Tata Motors said.
On a sequential basis, the net loss has been narrowed
from Rs 1,902.4 crore in the June quarter, which again was led
by JLR, which since its turnaround from 2010 has been keeping
the group afloat.
The hugely underwhelming set of numbers, driven by an
all-round poor show by JLR, its till-recently its cash-cow and
the profit centre, has forced the company to announce massive
cost savings to the tune of 2.5 billion pounds over the next
JLR, which the Tatas had bought form Ford Motor in the
thick of the global financial crisis for USD 2.2 billion, on
a standalone logged in a net loss of 101 million pounds.
"While 500 million pounds of the announced 2.5 billion
pounds of capex reduction for JLR will come this fiscal, a
similar amount will be saved next fiscal as well. The rest of
the savings will come from other cost recalibrations," group
chief financial officer PB Balaji told reporters here.
But Balaji, who joined the company 11 months ago from
HUL, was quick to underline that the capex re-calibration
"does not in any which way will see the company cutting down
on its products investments".
"We are a product-driven company, which thrives on
cutting-edge technologies. We've around 16 nameplates in the
pipeline by 2024 and none of them will be subjected to this
capex reduction. But that does not mean won't rationalise out
inventories. We have already announced plant shutdowns in a
phased manner to rationalise cost, inventory among others,"
The company described the situation in China, the
largest profit and volume centres for many years now for the
marquee British arm of Tata Motors, as "grave and very, very
unprecedented", where its volume plunged 43.8 per cent against
an industry decline of 7.7 per cent.
On a standalone basis, the domestic arm and the parent
Tata Motors reported a net profit of Rs 109.14 crore on the
back of an industry leading volume growth of over 31 per cent
against the industry growth of a little over 3 per cent in the
It had reported a net loss of Rs 283.37 crore in the
second quarter of fiscal 2018. But the bottomline pales
sequentially as in the June quarter it had posted a whopping
Rs 1,187.65 crore, which is down by 91 per cent now.
Balaji said over 50 per cent of the net loss of Rs
1,009 crore came in from a one-time charge of Rs 530 crore,
most of which arose from the shuttering of its Thailand
operations, and over one million pounds in forex losses due to
the continuing plunge in the rupee.
The domestic revenue grew to Rs 17,758.69 crore during
the quarter from Rs 13,310.37 crore as standalone volume rose
25 per cent to 1,90,283 units driven by robust sales of
commercial and passenger vehicles.
Tata Group chairman N Chandrasekaran said the domestic
business continued to deliver strong improvement in
operational and financial performance by implementing the
'Turnaround 2.0' strategy effectively.
"We've improved our market shares whilst delivering
robust improvement in profitability in both the commercial
vehicles and passenger vehicles and generated positive free
cash flows," he said, adding this strong performance in the
face of a competitive market augurs well for the future.
"Our solid, all-around performance in Q2 has
demonstrated that our 'Turnaround 2.0' is in full swing. This
was possible due to a robust product and innovation pipeline,
strong market activation, rigorous cost cuts and structural
process improvements," chief executive Guenter Butschek said.
The JLR leadership team 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 the H2 of FY19," Chandrasekaran added.
Provision for impairment of capital work-in-progress
and intangibles stood at Rs 93.21 crore and provisions for
closure of operations of the Thailand subsidiary stood at Rs
537.08 crore, hitting the bottomline, the company said.
Operating margin fell by 130 bps to 9.9 per cent and
pre-tax margin contracted 310 bps to 1.7 per cent in the
JLR chief executive Ralf Speth described the China as
a "very, very difficult situation", where consumers are just
holding back from buying. Its sales plunged a whopping 43.8
per cent against overall luxe car market fall of 7.7 per cent.
But he did not offer a clear answer to the plight of
his sales, except saying there has been a very large inventory
pile up and dealers have been facing margin troubles.
"As the situation came in our face, we decided to cut
back inventory at the same time not to follow a push strategy
as other have been doing. As a premium luxury car maker we
believe in pull strategy and not a push strategy," Speth said,
implying that the company has not been and will not be
offering discounts as the rivals are doing to push volumes.
JLR revenue degrew 11 per cent to 5.63 billion pounds
as retail sales dropped 13.2 per cent to 1.29 lakh units and
wholesales plunged 14.7 per cent to 1.3 lakh units. This has
its operating margin dropping 270 bps to 9.1 per cent.
But China still remains its single largest market in
volume terms with around 20 per cent market pie, which is down
by over 200 bps.
Speth also said there is no certainty about the Brexit
outcome, which as of now will be effective March 29, 2019. "We
ship 25 million parts annually from Britain and we wish the
transition does not affect this. The just opened 1.2 billion
pounds Slovakian plant with an annual capacity of 1.5 lakh
units should be able to help. Slovakia will rollout Discovery
initially and then the Defender in the second phase," he said.
Tata Motors shares rose 0.76 per cent at Rs 178.65 on
BSE, whose benchmark Sensex jumped over 551 points.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)