By : JHARNA MAZUMDAR
NEW DELHI :
Despite the pandemic fear looming large across the globe, auto major, Tata Motors surprised the street with its Jaguar Land Rover unit returning to profit in Q2FY21, reporting a significant improvement in positive cash flow in the quarter, as sales and revenue recovered from the impact of COVID-19 in Q1FY21, but remained below pre-pandemic levels from a year ago. Industry experts feel the positive trend is likely to continue as the company is planning a series of new launches in the coming quarters.
Analysts says, while JLR’s near-term volumes may be at risk from a potential second wave of COVID-19, JLR’s mixed improvement and tight cost capital expenditure control would drive sharp improvement in operating performance and debt reduction in the coming quarters. Also, new launches are likely to drive sales of the company going forward. The positive sales are expected to continue and things are expected to improve as the vaccine for COVID-19 is expected to be available in the coming months.
A gradual improvement in sales is expected to continue and will be supported by new and refreshed products, including the refreshed Jaguar F-PACE as well as 2021 model year Range Rover Velar, Jaguar XF and Jaguar XE. Furthermore, Jaguar Land Rover continues to expand its offering of electrification across its model range. Of the 13 nameplates in the company’s product portfolio, seven have now been revealed with plug-in hybrids and nine with mild-hybrids, in addition to the full battery electric Jaguar I-PACE. One more PHEV (Plug-In Hybrid Electric Vehicle) and two more MHEVs (Mild Hybrid Electric Vehicle) are expected to be launched later this fiscal.
“Although Jaguar Land Rover is not immune to the headwinds impacting the global automotive industry, it has the foundations in place to generate long-term sustainable profitability,” said JLR CEO, Thierry Bolloré. Although the outlook remains uncertain as a result of COVID-19 and uncertainty over future in UK / EU trading arrangements, Jaguar Land Rover expects the recovery in sales, revenue, and profitability to continue in the second half of FY21, supported by Project Charge+. The company also expects its positive free cash flow will continue over the second half of the year and hopes to achieve positive free cash flow in FY22 to reduce net debt and increase financial resilience, the company said.
JLR’s retail sales in Q2FY21 of 113,569 units were up 53.3% quarter-on-quarter (QoQ) with almost all retailers now open, but the retail sales in most markets continued to be impacted by COVID-19 and hence were down 11.9% year-on-year (YoY).
The company said, China sales were particularly encouraging, up 14.6% sequentially and 3.7% year-on-year. The Tata Motors and JLR businesses generated cash flows of Rs 2,300 crore and UK pound 463 million in the quarter.
Analysts feel that while JLR’s retail volumes have slipped about 12% year-on-year (YoY), the 53% sequential pick-up has been impressive. The improvement in China, coupled with Europe, and the US markets are also picking up despite the second wave of COVID-19 cases in these countries is notable. “The performance overall is impressive for the quarter as the company manged to show improved margins in these challenging times,” said an analyst from Dolat Capital.
JLR’s global retail network has also reopened. Also, the overall discount levels have come down, aiding revenues. JLR’s Q2 revenues grew 52% sequentially, although year-on-year, they were lower by 28%. Still, lower costs and the operational performance have resulted in improved profitability. JLR’s profit before tax, turned positive after two quarters of heavy losses.
Despite a significant drop in JLR volumes, the company recorded healthy margins. This resulted in significant narrowing down in consolidated losses. According to a Motilal Oswal report, while JLR’s near-term volumes may be at risk from a potential second wave of COVID-19, JLR’s mix improvement and tight cost capital expenditure control would drive sharp improvement in operating performance and debt reduction.
Domestically, both TML’s commercial and passenger vehicle businesses are recovering well after the lockdown. Tata Motor’s loss widened year-on-year to Rs 307.3 crore, but was far below what analysts were expecting. The auto major’s total revenue from operations dropped by 18.19% year-on-year to Rs 53,530 crore.
