Tata Motors posts Rs 1,756 cr Q3 profit on higher JLR sales; flags slowdown, coronavirus impact on business

Tata Motors MD and CEO Guenter Butschek said the downturn in the automotive industry continued in the third quarter as the economy slowed down

FP Staff January 31, 2020 07:13:57 IST
Tata Motors posts Rs 1,756 cr Q3 profit on higher JLR sales; flags slowdown, coronavirus impact on business
  • Revenues from British arm Jaguar Land Rover rose to 6.4 billion pounds in the quarter under review, an increase of 2.8 percent compared to the year-ago period

  • In India, Tata Motors said the auto industry continues to be impacted by the general economic slowdown.

  • Tata Motors MD and CEO Guenter Butschek said the downturn in the automotive industry continued in the third quarter as the economy slowed down

Tata Motors on Thursday reported a consolidated net profit of Rs 1,755.88 crore in the three months ended December 2019, mainly helped by higher Jaguar Land Rover sales in China, but warned of general economic slowdown continuing to impact domestic auto industry, according toa PTI report.

The company's Chief Financial Officer P B Balaji said it is keeping a "close watch" on the developing situation in China, which is grappling with coronavirus outbreak, and that it was too early to take a call on production in the wake of the development.

The homegrown automaker had a consolidated net loss of Rs 26,960.8 crore in the year-ago period. Consolidated results benefit from JLR China recovery and Project Charge offset by M&HCV decline & and stock reduction in India, the company said in a release.

The company's consolidated total revenue from operations stood at Rs 71,676.07 crore in the December quarter compared to Rs 76,915.94 crore in the same period a year ago.

During the third quarter, the company's standalone wholesales, including exports, declined 24.6 percent to 1,29,185 units.

Revenues from British arm Jaguar Land Rover rose to 6.4 billion pounds in the quarter under review, an increase of 2.8 percent compared to the year-ago period.

"I think on the JLR what stood for us was the continued recovery in China, as well as delivery of Project Charge," CFO Balaji said. China JLR reported a growth of around 24 percent and the company sees a strong demand for the new Range Rover Evoque model. The order book for new Defender model is now starting to build very strongly, he said.

On a standalone basis, the company posted a net loss of Rs 1,039.51 crore in December 2019 quarter. In the comparable period a year ago, it had a profit of Rs 617.62 crore.

Standalone total revenue stood at Rs 10,842.91 crore in the third quarter of current fiscal whereas the same was at Rs 16,207.67 crore in the year-ago period.

Tata Motors posts Rs 1756 cr Q3 profit on higher JLR sales flags slowdown <span class=coronavirus impact on business" width="380" height="285" />

Representational image. Reuters.

In India, the company said the auto industry continues to be impacted by the general economic slowdown. The profitability was impacted by an adverse mix of factors and despite increasing market share, M&HCV volumes declined 48 percent.

"This coupled with pro-active system stock reduction of Rs 3,800 crore resulted in a loss of operating leverage," it said, according to PTI.

Tata Motors MD and CEO Guenter Butschek said the downturn in the automotive industry continued in the third quarter as the economy slowed down.

"Despite gaining sequential market shares in M&HCV, ILCV and SCV this quarter, our financial performance was impacted due to the downturn coupled with the inventory corrections we took to get ready for BS-VI (implementation).

"Our focus on retail acceleration and system stock reduction helped us achieve a multi-quarter low inventory level in CV and PV, while simultaneously getting ready for a smooth transition to BS-VI," he noted.

According to the company, Jaguar Land Rover continued its turnaround with another quarter of strong delivery.

China continues to improve gradually while Project Charge, which seeks to reduce cost and increase cash flows, is well ahead of plans having already delivered 2.9 billion pounds so far, the automaker said.

"It (Project Charge) will have a target to deliver a further 1.1 billion pounds of cost savings and therefore, we will aim to deliver accumulated over 4 billion pounds of saving by March 2021," Balaji said during the earnings call to discuss the third-quarter results.

"Our performance fundamentally has been impacted by lower volumes and in the market, as well as stock corrections," he said.

According to Balaji, there are clearly a few things that are starting to move in the right direction, particularly with respect to liquidity issue easing, and inquiries are gradually starting to rise.

"So, I think gradually there are parts of it that are falling together... what's really putting us in a good place is that our inventory correction portion been mostly done and dusted," he noted.

While noting that the company remains concerned about the intrinsic demand and weak consumer sentiments, Balaji also said it expects a perceptible improvement in demand outlook as the infrastructure investments announced by the government pick up pace.

"In the domestic market, we continue to manage the slowdown well, by ensuring that we're doing the right things, continuing to take out inventory.

"... and we are starting to see sequential improvement in our market shares and our performance," he said.

Proft hit from coronavirus break

The coronavirus outbreak in China could hit profits at luxury car brand JLR, Tata Motors said on Thursday, the latest company to warn of an impact from the epidemic that has killed 170 people and forced businesses to suspend operations, according to a Reuters report.

It could hamper JLR production in China as the epidemic has raised concerns that thousands of Chinese factory workers on extended Lunar New Year holidays may struggle to get back to work next week due to extensive travel restrictions.

The Indian carmaker said the outbreak could impact its profit margin forecast of around 3% for the JLR unit in fiscal 2020 at a time when it was making progress on a turnaround plan to improve sales in China.

Several companies including Tesla Inc (TSLA.O), Apple (AAPL.O) and Starbucks (SBUX.O) have warned of a possible impact from the outbreak.

“We need to see when people come back and resume work, how soon they can replenish pipeline inventory,” Chief Financial Officer PB Balaji said as the company reported its third-quarter results.

--With inputs from agencies

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