Tata Motors Q1FY19 earnings suffers JLR hit, reports Rs 1,863 crore loss

Passenger vehicle maker Tata Motors posted a weak June 2018 quarter by reporting net loss of Rs 1,863 crore during Q1FY19 compared to net profit of Rs 2,175.16 crore in Q4FY18 and Rs 3,199.93 crore in Q1FY18. Meanwhile, the company’s revenue came in at Rs 67,081.29 crore which was up by 12.14% from Rs 59,818.22 crore in Q1FY18 but down by 26.51% from Rs 91,279.09 crore in Q4FY18. 

In Q1FY19, wholesale (excluding exports) grew by 59% to 176,868 units with broad based growth across the entire portfolio on a low base. In the domestic market, M&HCV trucks grew by 111%, ILCV trucks by more than 73%, SCV and pick ups by 57%. 

Similarly, in domestic market, commercial vehicle posted a growth of 31%, whereas passenger vehicles were up by 50%. 

Tata Motors explains that CV growth reflects launch of new products and higher economic activities due to the improved industrial activity, robust demand in private consumption and government spending on infrastructure. Nexon, Tiago and Tigor continued to deliver strong growths. 

Guenter Butschek, CEO & MD, Tata Motors said, "As I look ahead, there could be a few challenges in the short term particularly in commercial vehicles as the new regulations on axle loads come into effect but remain positive on the long term potential of the Indian market and I am confident that Tata Motors is taking the right steps to drive Competitive, Consistent, Cash Accelerate growth."

Finance costs increased by Rs 266 crore to Rs 1,375 crore during Q1 FY'19 vs same quarter prior year. The increase is primarily due to higher borrowings in JLR. 

During this quarter, JLR's revenues  were £5.2 billion, 6.7% lower year-on-year primarily as a result of the lower wholesales and increased incentives in China in advance of the 1 July duty reduction. The lower wholesales and higher China incentives combined with unfavourable balance sheet currency revaluation and higher depreciation and amortisation resulting from continuing investment led to a pre-tax loss for the quarter of £264 million (negative EBIT margin). Earnings before interest, tax and depreciation (EBITDA) were £325 million (6.2% margin). 

JLR  continues to invest in new vehicles, next-generation automotive technologies and facilities to support its future sustainable growth, with total investment spending of £1.1 billion for the quarter. This investment spending and seasonal working capital outflows of £1.0 billion led to negative operating cash flow of £1.7 billion. The company plans to invest in the region of £4.5 billion in the current financial year. 

For Q1 FY 19, Retail sales grew 5.9% year-on-year to 145,510 vehicles. The increase reflects growing sales ofthe new

Range Rover Velar, Range Rover Sport, Land Rover Discovery and Jaguar E-PACE. However, wholesales (including China JV) were 13,950 units lower than retails, primarily reflecting lower wholesales in China in advance of the reduction in import duties from 25% to 10% on 1 July and planned dealer stock reduction in other markets. 

The profitability target for the full financial year ending 31 March 2019 (FY19) remains within the previous 4-7% planned margin JLR had shared for FY19-FY21. 

Closing net debt was Rs 62,436 crore compared to Rs 39,977 crore as at 3Pt March 2018, reflecting negative free cash flow at both TML and JLR with continued high investments. Net Automotive debt stood at 32,977 crore vs 13,889 crore as at March 2018. 

Free cash flow (automotive) in the quarter, was negative Rs 18,109 crore reflecting lower operating profits at JLR and unfavourable working capital in both TML (S) and JLR. 

Following the result announcement, Tata Motors share price ended below 1.18% at Rs 264.15 per piece on BSE.