Tata Motors’ reports loss of Rs 9,864 crore for Q4 FY2020

Tata Motors’ has reported a consolidated a loss of Rs 9,864 crore for Q4 FY2020, compared to a profit 1,108 crore for the same period last year, as company’s profits were hit by the economic slowdown in the country, which was further affected by Covid-19 lockdown, new axle load norms, and steep volume decline in commercial vehicle sales among others. The net revenue for the period stood at Rs 62,493 crore, compared to Rs 87,286 crore for the same period last year.

For the financial year ended March 31, 2020, the company reported consolidated revenue of Rs 264,041 crore, compared to Rs 304,904 crore for the same period last year. On the other hand, Tata Motors’ managed to reduce its losses from Rs 28,724 crore in FY2019, to Rs 11,975 crore in FY2020.

In terms of standalone business, the company said that Jaguar Land Rover's return to profit in the second and third quarters, reflected improvements achieved through its transformation programme, fourth quarter results were significantly impacted by the pandemic. Project Charge helped the delivered cumulative savings of £3.5 billion (Rs 31,706 crore). The company reported its retail sales fell 12.1 percent FY2020, which resulted in revenue of £23 billion (Rs 208,357 crore) and loss of £422 million (Rs 3823 crore) for FY2020.

Prof Sir Ralf Speth, JLR Chief Executive commented: “Jaguar Land Rover’s early action to transform its business meant that as a company we were on track to meet our full-year expectations and operational and financial targets before the pandemic hit in the fourth quarter. We also reacted quickly to the disruption. Our immediate priority has been the health and wellbeing of our people – and this remains the case as we have now begun the gradual, safe restart of our operations. In such uncertain times, I remain convinced that Jaguar Land Rover’s focus on its people, its innovative products and its Destination Zero mission will remain the key to navigating out of this global crisis effectively. In China, we are beginning to see recovery in vehicle sales and customers are returning to our showrooms. Our operational fitness gives me confidence that we can weather this storm.”

Multiple factors weigh heavy on Tata Motors’ domestic sales
Tata Motors says demand in India was already adversely impacted by the general economic slowdown, liquidity stress and stock corrections due to BS-VI transition, which was further affected by the lockdown. It saw steep volume decline, particularly in the M&HCV segment, and resulted in negative operating leverage impacted profitability and cash flows. For the year, the company said its CV retails came at around 361,000, which helped it improve its market share in MHCV 57.4 percent and I&LCV to 47.2 percent, while PV sales came at around 149,000. The standalone revenue came at Rs 43,928 crore down 36.5 percent YoY, and a loss of Rs 7,289 crore compared to a profit of Rs 2,021 crore YoY.

Guenter Butschek, CEO and MD, Tata Motors, said, “The auto industry faced strong headwinds in FY20 amidst a slowing economy due to multiple factors - liquidity crisis, high fuel prices, changes in axle load norms and BS VI transition, all leading to weak consumer sentiments and subdued demand across segments. Disruption in the supply chain induced by the pandemic and the nationwide lockdown in mid-March 2020 added to the problems. Disappointingly, even with our relentless focus on retail acceleration, ‘Mission Zero’ on BS-IV inventory and stringent cost reduction initiatives, we have not been able to mitigate the impact on our financials. Currently, we are operational at all our plants and at most of the dealerships with a strict adherence to safety and health norms. With a calibrated scaling up of our activities, we will continue to build agility to respond dynamically to the changing consumer behaviour through closer connect to our customers and by leveraging digital interventions to provide the best-in-class customer experience, while improving our market, operational and financial performance.”

Capital expenditure cut down by around 70%
Tata Motors says that it expects Q1 FY2021 to be significantly weaker for both Jaguar Land Rover and Tata Motors with the full impact of lockdowns being reflected in the results. A gradual improvement in performance is anticipated in the coming quarters and is betting on new product range, while driving a robust cost and cash savings agenda. The company says actions are underway to significantly deleverage the Tata Motors Group with JLR to become sustainably cash positive from FY 2022 while becoming future ready.

The company expects domestic sales to start recovering from June onwards and is gearing up its supply chain accordingly. It will focus on conserving cash by rigorously managing cost and investment spends to protect liquidity. The OEM says it has called out a cost savings program of Rs 1,500 crore and a cash improvement program of Rs 6,000 crore. As part of this plan, it has deferred or cancelled lower margin and non-critical investment and is targeting capex spending of approximately Rs 1,500 crore in FY 2021, which is substantially lower than Rs 5,300 crore in FY2020 and FY2019. With peak lockdowns in the first quarter, it expects significantly lower sales in the quarter and negative free cash flow of about Rs 5,000 crore in Q1 FY2021, of which around Rs 3,500 crore is related to one time working capital outflows.

Tata Motors says a gradual recovery of sales and improving cash flows for the remainder of the year and expects to end the FY2021 with positive free cash flows.

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