Jaguar Land Rover returns to profit following increase in wholesale levels

Jaguar Land Rover, the luxury car maker, has returned to profit, its third quarter results have revealed.

Pre-tax profit in the quarter to January 25, 2023, was £265m, up from a loss of £9m a year ago with a positive EBIT margin of 3.7%, up from 1.4% in Q3 FY22.

The higher profitability reflects increased wholesale volumes with favourable mix, pricing and foreign exchange offset partially by higher inflation and supplier claims largely related to constrained volumes.

Profit after tax in the quarter was £261m, up from a loss of £67m in Q3 FY22. Free cash flow was £490m in the third quarter, up from £164m in Q3 FY22.

The group, which has production plants in Halewood on Merseyside, and Solihull and Castle Bromwich in the West Midlands, notched revenues of £6bn in the third quarter, a 28% increase on the previous year’s third quarter, and 15% better than the current financial year’s second quarter.

Wholesale volumes were 80,000, the highest level since the first quarter fiscal year 2022 when the semiconductor shortages began and up 15% versus. Q3 FY22.

However, wholesales in China during the quarter were impacted by lockdowns leading to dealer closures followed by high rates of staff absence as COVID-19 restrictions were relaxed. The situation is expected to recover in the fourth quarter with dealers open and staff absence closer to normal levels in January.

Wholesale sales are the finished cars JLR sells as a business, while retails are vehicles customers buy from retailers.

The production ramp up of New Range Rover and New Range Rover Sport continued with 27,000 units wholesaled in the quarter, up from 14,000 in the second quarter.

Liquidity remained strong at the end of the quarter with £3.9bn of cash. The undrawn £1.5bn unsecured revolving credit facility was extended to April 2026 and an extension to a £600m equivalent China bank loan maturing in June 2023 signed.

Strong demand continues with 85,000 cars delivered to retail clients in Q3 while taking 95,000 new orders with the total number of orders increasing to a new record of 215,000 units.

The group’s three most profitable models, the New Range Rover, New Range Rover Sport and Defender account for more than 74% of the order book.

The modern luxury Range Rover SV is the fastest ever selling Special Vehicle Operations model, with more than 5,000 orders since launch in October 2021, at average pricing above £180,000.

Today’s update revealed that the group’s Refocus transformation programme has delivered £850m year to date and is on track to deliver £1bn of savings this financial year.

The reimagined pure-electric Jaguar models, launching in 2025, will be built in Solihull alongside BEV Range Rovers, heralding an exciting new era of electric car production in the UK, the group said.

Adrian Mardell, JLR’s interim chief executive, said: “Jaguar Land Rover has returned to profit as chip shortages eased in the quarter and production and wholesales increased.

“These improved results are testament to the hard work and dedication of our people across the business who have delivered a further increase in production of our New Range Rover and Range Rover Sport models.

“We remain committed to our Reimagine strategy which will transform JLR into an all-electric modern luxury business, whilst delivering our SBTi climate goals and striving to exceed our clients’ expectations.”

Although there continue to be supply chain and other macro risks, JLR’s guidance for the full year remains unchanged. Positive profits and free cash flow in Q4 FY23 on wholesales of 80,000 or more are expected to achieve break even cashflow and a positive EBIT margin for the full year.