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BIZ-LD-RESULTS-TATA MOTORS


PTI mumbai India
Updated: 31-10-2018 20:44 IST

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

18 months.

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,"

he said.

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

quarter.

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

reporting quarter.

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.)

COUNTRY : India

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