Tata’s shares slump after revealing £3.4bn JLR quarterly loss

Shares in Jaguar Land Rover’s parent company Tata Motors fell by 17% yesterday after the car maker posted a £3.4bn pre-tax loss for the last three months of 2018.

The company reported revenues of £6.2bn and a pre-tax loss before exceptional items of £273m (EBIT margin -2.6%) for the three months to the end of December.

JLR said that the automotive industry is facing “significant market, technological, and regulatory headwinds”while at the same time, investment in new models, electrification and other technologies remains high.

“Given the muted demand scenario and the associated impact on the financials, JLR has concluded that the carrying value of capitalised investments should be adjusted down, resulting in a non-cash £3.1bn pre-tax exceptional charge and an overall pre-tax loss of £3.4bn for the quarter.”

Retails for the quarter were 144,602 vehicles, compared with 154,447 a year ago, primarily as a result of continued challenging market conditions in China, which it said were offset partially by encouraging growth in North America and the UK.

The company’s sales in Europe were up slightly, despite an 8% drop in the overall market.

Chief executive Dr Ralf Speth said: “This is a difficult time for the industry, but we remain focused on ensuring sustainable and profitable growth, and making targeted investments, that will secure our business in the future.”

The company had previously announced plans to achieve £2.5bn of investment, working capital and profit improvements by March 2020, announcing in January that it would reduce its global workforce by 4,500 people.

This is expected to result in a one-time exceptional redundancy cost of around £200m, it said.

JLR added that the EBIT margin for the full financial year ending March 2019 is expected to be marginally negative, which will result in a pre-tax loss for the year before exceptional items.

Speth added:  “Jaguar Land Rover reported strong third quarter sales in the UK and North America, but our overall performance continued to be impacted by challenging market conditions in China. We continue to work closely with Chinese retailers to respond to current market conditions with a ‘Pull’ based approach to vehicle sales. Today, we are also announcing a non-cash exceptional charge to reduce the book value of our capitalised investments. This accounting adjustment is consistent with the other decisive actions that we must take as part of our ‘Charge’ and ‘Accelerate’ transformation programmes to create an efficient and resilient business, enabling Jaguar Land Rover to counter the multiple economic, geopolitical, technological and regulatory headwinds presently impacting the automotive industry.”