Tata Motors-owned Jaguar Land Rover (JLR) on Wednesday posted a pre-tax loss of 90 million pounds as the sales of the luxury car brands declined 13.2 per cent year-on-year, primarily because of the challenging market conditions in China.
The company reported revenues of 5.6 billion pounds and a pre-tax loss of 90 million pounds, mainly reflecting lower sales. Earnings before interest, tax and depreciation (EBITDA) were 511 million pounds, equivalent to a margin of 9.1 per cent.
Retail sales declined 13.2 per cent year-on-year, to 129,887 vehicles, for the fiscal quarter ending September 30, according to the financial results posted by the Tata Group company.
JLR said that the fall in sales primarily reflected challenging market conditions in China, where demand was adversely impacted by consumer uncertainty following import duty changes and escalating trade tensions with the US.
Ongoing uncertainty over the future of diesel vehicles in Europe and around Brexit negotiations also contributed to the loss-making quarter for the UK-based company.
"In the latest quarterly period, we continued to see more challenging market conditions. Our results were undermined by slowing demand in China, along with continued uncertainty in Europe over diesel, Brexit and the WLTP (Worldwide harmonised Light vehicles Test Procedure) changeover," said JLR CEO Dr Ralf Speth.
"Given these challenges, Jaguar Land Rover has launched far-reaching programmes to deliver cost and cash flow improvements. Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable, profitable growth," he said.
In North America, JLR said demand for SUVs remained strong, but overall sales were held back by slowing orders for passenger cars – in line with the market as a whole.
In Europe, sales were also affected by continuing weakness in diesel demand and the introduction of new WLTP homologation rules and UK sales were adversely impacted by diesel taxation and regulations, alongside continuing uncertainty related to Brexit.
JLR began a two-week shut-down at its Solihull plant in the West Midlands region last week, a move it had attributed to achieving "operational efficiencies" as a result of fluctuating global demand. The move came weeks after the company moved staff at its Jaguar factory in Castle Bromwich to a three-day week.
As part of its focus on improving profitability and cash flow, JLR said it has launched two initiatives, called "Charge" and "Accelerate", to identify short-term cost and cash flow improvements as well as longer-term operating efficiencies.
"Total profit, cost, and cash flow improvements of 2.5 billion pounds over the next 18 months are targeted. As part of this, the company has taken action to reduce planned spending by about 500 million pounds to 4 billion pounds per year this financial year and next," the company said.
According to further financial details released on Wednesday, total investment spending in the second quarter was 1 billion pounds and cash flow after this investment was negative 624 million pounds for the three-month period.
Jaguar Land Rover strengthened its financial resources in the period by issuing a 500-million euro seven-year bond in September.
The company ended the quarter with 2.6 billion pounds of cash and a 1.9 billion pounds undrawn credit facility. A USD 1-billion loan with a final maturity in 2025 was also completed in October.
In terms of new product introductions, Jaguar Land Rover is currently launching the Jaguar I-PACE in North America, China and other overseas markets and the Jaguar E-PACE has recently joined the line-up in China. Further model introductions will include the next-generation Defender.
"We remain focused on delivering improved profitability and cash flow in the second half while pressing ahead with our product offensive. In the latest reporting period, we introduced important new models including the Jaguar E-PACE and the revolutionary electric I-PACE. Production has begun at our new plant at Nitra, in Slovakia," said Speth.
"We have also continued our development of autonomous, connected and electrified products and services, which will shape our strategy for the future," he added.
The company said it expects its financial performance to improve in the second half, and now anticipates pre-tax profits to be about break-even for the full financial year ending March 31, 2019, impacted by the weaker than planned first half.
(With inputs from agencies.)