JLR’s record year dented by Chinese headwinds

TURBULENCE in China has had an adverse impact on the full year performance of vehicle manufacturer Jaguar Land Rover.

Reduced demand from the major export market together with the explosion at the port of Tianjin in August – which claimed 112 lives – were just two of the principal factors which combined to dent profits.

However, there was some positive news for the manufacturer as it broke the half-million annual sales milestone for the first time in its history.

Vehicle retail sales rose 13% to 521,571 for the year to March 31, 2016, as an expanded product line-up tempted new buyers.

The combination of this increased demand, solid growth in markets including Europe, North America and the UK helped support full-year financial revenues of £22.2bn, up £342m on the previous 12-month period.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) was £3.31bn with a solid margin of 14.9% before one-time reserves and charges of £166m, including a product recall in the United States for potentially faulty passenger airbags, a doubtful debt and previously capitalised investment.

EBITDA as reported was £3.15bn with 14.2% margin), down from a record £4.13bn a year ago, which the Indian-owned company said primarily reflected less favourable market and product mix, especially in the first half of the year and unfavourable foreign exchange revaluation.

Pre-tax profit was £1.56bn after an exceptional charge for the Tianjin Port explosion of £157m (net of insurance and other expected recoveries to date).

JLR had about 5,800 vehicles stored at the port at the time of the explosion. Many of these vehicles were destroyed or damaged.

Cash flow was £791m after total investment spending of £3.14bn. Pre-tax profit was down from £2.6bn last year, which the company said was a reflection of market conditions during the first half of the year – especially in China, model mix and continued investment.

In a particularly strong fourth quarter, retail sales reached 158,813 vehicles, up by 28% when compared to the previous quarter last year. EBITDA before the £166m of one-time reserves and charges was £1.07bn (£903m as reported) with a margin of 16.2% (13.7% as reported). This compared to EBITDA of £1.02bn (17.4% margin) a year ago. Pre-tax profit was £577m, up £181m compared with the same quarter in the same quarter in 2014/15.

JLR said it planned to invest £3.75bn during this fiscal year (2016/17) to support continued expansion of the business.

This will include the expansion of global production capacity, new technologies and new vehicles, such as the Jaguar F-Pace and the Range Rover Evoque Convertible.

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