Tata Motors posts record $4 billion loss on JLR woes
02-08-19, 10:08 AM
#1
Tata Motors posts record $4 billion loss on JLR woes
BENGALURU/NEW DELHI (Reuters) - Jaguar Land Rover’s owner Tata Motors Ltd stunned markets by posting the biggest-ever quarterly loss in Indian corporate history of about $4 billion (£3.1 billion) on slumping China sales, sending its shares crashing as much as 30 percent.
Tata Motors also warned that the Jaguar Land Rover (JLR) unit, which brings in most of its revenue, would swing to an operating loss in the year to March versus an earlier projection for breakeven, given weak sales at the luxury British carmaker.
JLR’s China retail sales almost halved in the December quarter as overall demand in the world’s biggest auto market contracted last year for the first time since the 1990s. The firm has also been buffeted by Brexit woes and weaker business for diesel cars that account for bulk of its sales in Europe.
Tata Motors turned in a third-quarter loss of 269.93 billion rupees ($3.8 billion) on Thursday, more than half its current market capitalisation of $6.1 billion, mostly due to a massive impairment at JLR. Analysts were expecting a profit.
“We are now taking clear and decisive actions in JLR to step up its competitiveness, reduce costs and improve cash flows and make the business fit for the future,” Chief Financial Officer PB Balaji told reporters on a conference call on Thursday.
JLR has taken steps to address the slide in China sales by changing its strategy to focus on profits for dealers instead of sales and incentivising retail sales over wholesale, he said.
“We are encouraged by continued demand for the refreshed Range Rover and Range Rover Sport,” JLR Chief Commercial Officer Felix Brautigam said in a statement.
“With deliveries of the new Evoque due to start later this quarter, we look forward to building momentum.”
But analysts expect JLR to struggle to generate profit with China’s economy projected to slow further this year after growth eased to its weakest pace in almost three decades in 2018.
JLR’s overall retail sales in January plunged 11 percent.
The dour numbers prompted Tata investors to make a beeline for the exits as markets opened on Friday, with shares of the company skidding to their lowest in nine years at one point.
The stock was down about 20 percent by 0720 GMT near 150 rupees, on track for its sharpest drop since 2003.
At least four brokerages cut their price target for Tata Motors shares after its quarterly loss.
Analysts at Jefferies pegged the stock at 250 rupees, versus an earlier target of 300 rupees, citing weak performance at JLR.
Tata Motors took a non-cash charge of 278.38 billion rupees for an impairment at JLR in the quarter. Changes in market conditions, especially in China, technology disruptions and rising cost of debt led to the charge.
JLR, Britain’s biggest carmaker, also faces disruption due to persistent uncertainty over a Brexit deal and has decided to halt production for a couple of weeks in April.
British Prime Minister Theresa May’s Brexit deal was rejected in parliament last month and the government is trying to make changes to win the support of lawmakers even as the date for Britain’s departure from the European Union looms less than two months away.
Tata Motors also warned that the Jaguar Land Rover (JLR) unit, which brings in most of its revenue, would swing to an operating loss in the year to March versus an earlier projection for breakeven, given weak sales at the luxury British carmaker.
JLR’s China retail sales almost halved in the December quarter as overall demand in the world’s biggest auto market contracted last year for the first time since the 1990s. The firm has also been buffeted by Brexit woes and weaker business for diesel cars that account for bulk of its sales in Europe.
Tata Motors turned in a third-quarter loss of 269.93 billion rupees ($3.8 billion) on Thursday, more than half its current market capitalisation of $6.1 billion, mostly due to a massive impairment at JLR. Analysts were expecting a profit.
“We are now taking clear and decisive actions in JLR to step up its competitiveness, reduce costs and improve cash flows and make the business fit for the future,” Chief Financial Officer PB Balaji told reporters on a conference call on Thursday.
JLR has taken steps to address the slide in China sales by changing its strategy to focus on profits for dealers instead of sales and incentivising retail sales over wholesale, he said.
“We are encouraged by continued demand for the refreshed Range Rover and Range Rover Sport,” JLR Chief Commercial Officer Felix Brautigam said in a statement.
“With deliveries of the new Evoque due to start later this quarter, we look forward to building momentum.”
But analysts expect JLR to struggle to generate profit with China’s economy projected to slow further this year after growth eased to its weakest pace in almost three decades in 2018.
JLR’s overall retail sales in January plunged 11 percent.
The dour numbers prompted Tata investors to make a beeline for the exits as markets opened on Friday, with shares of the company skidding to their lowest in nine years at one point.
The stock was down about 20 percent by 0720 GMT near 150 rupees, on track for its sharpest drop since 2003.
At least four brokerages cut their price target for Tata Motors shares after its quarterly loss.
Analysts at Jefferies pegged the stock at 250 rupees, versus an earlier target of 300 rupees, citing weak performance at JLR.
Tata Motors took a non-cash charge of 278.38 billion rupees for an impairment at JLR in the quarter. Changes in market conditions, especially in China, technology disruptions and rising cost of debt led to the charge.
JLR, Britain’s biggest carmaker, also faces disruption due to persistent uncertainty over a Brexit deal and has decided to halt production for a couple of weeks in April.
British Prime Minister Theresa May’s Brexit deal was rejected in parliament last month and the government is trying to make changes to win the support of lawmakers even as the date for Britain’s departure from the European Union looms less than two months away.
02-09-19, 10:27 AM
#3
Jaguar Land Rover’s owner Tata Motors Ltd stunned markets by posting the biggest-ever quarterly loss in Indian corporate history of about $4 billion (£3.1 billion) on slumping China sales, sending its shares crashing as much as 30 percent.
02-09-19, 01:44 PM
#5
Lexus Fanatic
One of the reasons Ford is more or less forced, today, to keep Lincoln around as its upmarket brand (even if it converts Lincoln to all-SUVs) is that they said Ta-Ta (pun intended) to Jaguar, Volvo, and Land Rover, selling JLR off to Tata. They also dumped Mercury as a potential upmarket division....though less-so then Lincoln. Dump Lincoln, and, at least in the American market, the company will be all bread-and-butter Ford products.
02-09-19, 02:46 PM
#6
Pole Position
Current Jag models are built on a budget, you can tell that from a mile away. previous XK, XF and current XJ gave me some confidence that Jaguar is on a right path and then XE and current XF happened, then F-pace and even more horrible E-pace and its gone!
02-09-19, 04:16 PM
#7
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02-09-19, 04:29 PM
#8
Lexus Fanatic
Of course they can. So can the Toyota Land Cruiser....look at the kind of cash it runs. But it is still overshadowed by a step-up nameplate, the Lexus LX.
02-09-19, 04:34 PM
#9
Lexus Fanatic
Don't want to get to far off-topic, but, Jag, IMO, lost it when they went from this........
........to this........
02-10-19, 09:28 AM
#11
Pole Position
Obviously these are not great results, but the devil is in the detail.
The vast majority of the loss was a write down in the book value of their manufacturing plants. 91% of the loss was taken as a write down in light of lower future revenue potential with falling sales in China (i.e. an asset that may once have reasonably been expected to generate a certain level of future revenue and profit is now expected to generate less - so the plants are worth less). It hits the balance sheet hard, but it isn’t a cash loss.
The vast majority of the loss was a write down in the book value of their manufacturing plants. 91% of the loss was taken as a write down in light of lower future revenue potential with falling sales in China (i.e. an asset that may once have reasonably been expected to generate a certain level of future revenue and profit is now expected to generate less - so the plants are worth less). It hits the balance sheet hard, but it isn’t a cash loss.
Last edited by swajames; 02-10-19 at 10:11 AM.
02-10-19, 09:38 AM
#12
Pole Position
The top one is an older XJ, the bottom is an XF.
The XJ interior is still a good place to be. Need to choose colors with care, black doesn’t look the best IMO, but material quality is pretty good.
02-10-19, 10:15 AM
#13
Lexus Fanatic
Yes, I know, but, on the average, it is still typical of Then-vs.-Now Jag interiors. The Connally Leather and large swaths of rich Walnut wood have essentially been replaced with more mainstream materials.
02-10-19, 10:43 AM
#14
Pole Position
Some of that is just how the cars are specified, MM. Dealers will tend to order more generic black interiors for their inventory models. Lighter leather, seat detailing and different wood trims can still be ordered if you prefer those. This isn't unique to Jaguar. Dealers for most brands tend to prefer to stock their lot with pretty generic exterior/interipr color combinations.
02-10-19, 04:34 PM
#15
Lexus Fanatic
Some of that is just how the cars are specified, MM. Dealers will tend to order more generic black interiors for their inventory models. Lighter leather, seat detailing and different wood trims can still be ordered if you prefer those. This isn't unique to Jaguar. Dealers for most brands tend to prefer to stock their lot with pretty generic exterior/interipr color combinations.
I wasn't just referring to color. No matter how you look at it, Jag just doesn't use the same materials inside they once did. Of course, some people may prefer the newer, less-plush-looking interiors....and I respect their opinion. However, I don't...IMO it smacks of cost-cutting. Connally leather and burled walnut, of course are not cheap.
On the thread-topic (Tata's $4B loss), there's probably no way to directly tie it to Jag or LR interiors, so I can't make the statement (or the insinuation) that newer, less-plush interiors are the cause. But I can say that a lot of people like me, who liked old Jags, aren't too thrilled about some of the newer ones. The only real improvement inside was them getting rid of that silly "J" shift pattern with the lever.
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