Tata Motors today reported its consolidated financial result for Q2 FY2019 and September 2018. While the company saw strong domestic growth, its luxury car arm Jaguar Land Rover was adversely challenging market conditions, especially its largest market, China.
In Q2 FY2019, the company reported consolidated revenue of Rs 72,112 crore (+3%), EBITDA at 9.9 percent, and Loss After Tax (LAT) of Rs 1,009 crore. This performance was on the back of revenue of JLR (Rs 5,635 crore / -11%) and Tata Motors (Rs 17,759 crore / +33%), with EBITDA of 9.1 percent and 8.7 percent (respectively). Along with, JLR reporting a loss of Rs 101 crore during the quarter, while Tata Motors' reported PAT of Rs 109 crore.
Strong domestic growth
The company reported that the strong results reported by its domestic business was attributed to strong growth in both its CV and PV segment. Tata Motors' says the sales demand in CV was on the back of strong economic growth and demand while its passenger vehicle sales benefitted from having a range of new products.
According to the company, in Q2 FY '19 its domestic CV business saw growth across segments with M&HCV (23%), ILCV trucks (27%), SCV and Pick-ups (34%) and CV passenger (8%) all witnessing strong numbers. In the PV segment the company's overall sales went up by 18 percent, with Nexon and Tiago said to drive strong sales.
Commenting on the performance, N Chandrasekaran, chairman, Tata Sons, commented: “The Tata Motors' domestic business continued to deliver strong improvement in operational and financial performance by implementing the Turnaround 2.0 strategy effectively. We have improved our market shares whilst delivering robust improvement in profitability in both the commercial vehicles and passenger vehicles and generated positive free cash flows. This strong performance in the face of an intensely competitive market situation augurs well for the future."
"In JLR, market conditions, particularly in China, have deteriorated further. To weather this volatile external scenario, we have launched a comprehensive turnaround plan to significantly improve our free cash flows and profitability. The leadership team at JLR 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 H2 FY 19."
"As we take these structural actions, we continue to remain focused on sustainable profitable growth. I am confident that Tata Motors Group is building the right business model and the requisite capabilities for delivering Competitive, Consistent and Cash Accretive Growth in the medium to long term,” added Chandrasekaran.
Commenting on the result, Guenter Butschek, CEO and MD, Tata Motors, said, “Our solid, all-around performance in Q2 FY2019 has impressively demonstrated that Tata Motors ‘Turnaround 2.0’ is in full swing. The continued improvements were made possible due to a robust product and innovation pipeline, strong market activation, rigorous cost reductions and structural process improvements."
"Most importantly the entire organisation is on its toes and working to embed the 'Turnaround' culture as our new way of life. Therefore, despite near term market challenges, I am confident that Tata Motors will continue its journey of delivering 'Consistent, Competitive and Cash Accretive Growth' in the coming quarters too,” added Butschek.
Tricky China and uncertain Brexit pulls back JLR
Jaguar Land Rover, the Tata Motors' owned British brand has been witnessing strong headwinds on the back of geo-political reason. The company reported sales 129,887 vehicles in Q2 FY19 (-13.2%). The company admitted that challenging market conditions in China, where demand was adversely impacted by consumer uncertainty following import duty changes and escalating trade tensions with the US were one of the prime reasons for the decrease in sales. While in Europe, sales were affected on the back of continuing weakness in diesel demand and the introduction of new WLTP homologation rules on emissions. According to the luxury carmaker, UK sales were adversely impacted by diesel taxation and regulations, alongside continuing uncertainty related to Brexit. Reflecting lower wholesales, the company reported revenues for the quarter of £5.6 billion (Rs 52,897 crore), 10.9 percent lower year-on-year.
On a positive note, the company has reported that demand for SUVs remained strong in North America. JLR has begun production at its new plant in Nitra, Slovakia. The total investment in new vehicles, next-generation automotive technologies and facilities to support its future sustainable growth was reported to be £1 billion (Rs 9,451 crore).
Dr Ralf Speth, CEO, Jaguar Land Rover, said: “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 changeover.
Given these challenges, Jaguar Land Rover has launched far-reaching programs to deliver cost and cash flow improvements of £2.5 billion (Rs 23,615 crore) over the next 18 months. Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable growth. We remain focused on delivering improved profitability and cash flow in the second half while pressing ahead with our product offensive.”
Jaguar Land Rover has also decided to curtail the planned spending by £500 million (Rs 4,719 crore), which would translate to the company spending £4 billion (Rs 37,744 crore). The company (JLR) has now embarked on its turnaround plan, which will focus on cutting costs, preserve cash and improve margin.
In the quarter, net profit from joint ventures and associates reportedly contributed Rs 86 crore as compared to Rs 510 crore in the previous year. The decrease is coming mainly from the lower profitability in the JLR’s China JV (CJLR) due to market challenges. Other income (including government grants) was Rs 617 crore compared to Rs 506 crore YoY.