With an improvement in the performance of its Jaguar Land Rover (JLR) unit, Tata Motors Ltd. (TML), for the quarter ended December 31, 2019, reported a consolidated net profit of ₹1,756 crore against a net loss of ₹26,960 crore in the year-earlier period.
The company reported a consolidated revenue of ₹71,676 crore against ₹76,916 crore, down 7%.
JLR’s revenue stood at £6.4 billion, up 3%. TML’s standalone revenue stood at ₹10,843 crore, down 33%.
It’s pre-tax loss was ₹1,024 crore (against pre-tax profit of ₹519 crore) due to the volume decline in medium and heavy commercial vehicles, stock correction and negative operating leverage. JLR turnaround had been ‘satisfactory’, the company said, with the firm exceeding its (cash and cost savings) target of £2.5 billion and achieving £2.9 billion. Now, the company has launched “Project Charge+” with additional cost and cash savings of £1.1 billion in FY21.
Challenging conditions
Ralf Speth, CEO, JLR said, “Conditions in the automotive industry remain challenging but we are encouraged by the recovery in our China business and the success of the new Range Rover Evoque. Our improving financial results and the cost and cash flow achievements of Project Charge will support the next phase of our pipeline of exciting new vehicles and technologies, with a choice of outstanding electrified, petrol and diesel powertrains.”
TML said Mr. Speth will retire in September 2020 and a search committee had been set up to find his successor. However, he will continue with JLR as its non-executive vice-chairman. He will also continue to be on the board of Tata Sons.
In the domestic business, TML was impacted by the general economic slowdown. Its profitability was impacted by an adverse mix where despite increasing market shares, M&HCV volumes declined. This, coupled with proactive system stock reduction of ₹3,800 crore, resulted in loss of operating leverage.
“Growth continues to be impacted by subdued demand following the general economic slowdown, higher axle loads, liquidity stress and low freight availability for cargo operators,” P.B. Balaji, group CFO, Tata Motors, said during a conference call.
In commercial vehicle sales, domestic retails were higher by 16% (versus wholesales) and passenger vehicles domestic retails were higher by 35% (versus wholesales).
In Q3FY‘20 wholesales (including exports) decreased 24.6% to 1,29,185 units. In the domestic market, medium and heavy commercial vehicle (M&HCV) trucks de-grew 47.7%, intermediate and light commercial vehicle (ILCV) trucks de-grew 15.7%, small commercial vehicles (SCV) and pick-ups de-grew 6.1% and commercial vehicle passenger vehicles de-grew by 25.6%. Domestic passenger vehicles volumes were down 26%. Guenter Butschek, CEO and MD, Tata Motors, said, “The downturn in the automotive industry continued in Q3 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.”
“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 BSVI,”he added.
The company’s free cash flow (automotive) in the quarter was positive at ₹4,000 crore, compared with a negative ₹5,000 crore a year earlier reflecting focused working capital action at Tata Motors Ltd and continued strong performance at JLR.
