Tata Motors Q4 profit plunges 47% but beats estimates

Tata Motors Limited (TTM) reported a 47% plunge in net profit for the fourth quarter of 2019 due to lower revenue from operations. The results were impacted by asset impairment at Jaguar Land Rover and separation costs. In Jaguar Land Rover, the company continued to face challenges in China. However, the results exceeded analysts’ expectations.

Net profit attributable to shareholders dropped by 47% to INR1,117.48 crore. Earnings per ordinary share fell by 47.4% to INR3.28 and earnings per class A ordinary share dipped by 47% to INR3.38. The latest quarter results were impacted by asset impairment at Jaguar Land Rover (JLR) and separation cost.

Total consolidated revenues declined by 4% to INR86,422.02 crore. Revenue from Tata Motors Limited (TML) segment grew by 3.7% while revenue at JLR decreased by 5.2%. Total volumes decreased by 8.2% to 357,219 units.

In JLR, the company continued to face challenges in China which it is addressing priority. Tata Motors is taking decisive steps to lower breakeven and improve cash flows in order to weather the volatile external scenario.

In JLR, rising sales in UK and US contribute to revenues growth and has invested GBP3.8 billion in product development, new technologies, expanding manufacturing footprint, and streamlining product creation process. The company has experienced weak market conditions in China with a 5.6% decline in the total passenger vehicle market.

However, the company experienced significant growth in JLR US driven by new models and industry trends. JLR has outpaced industry and improved market shares due to expanded Land Rover and new Jaguar PACE model lineup. Land Rover benefited from the industry switch from cars to trucks and SUVs as well as growth from new products primarily Discovery and Velar.

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In the TML segment, the fourth quarter market conditions remained adverse due to significant stress on liquidity, higher capacity arising from axle load norm changes and lower economic activity. The commercial and passenger vehicles continued to deliver strong growths in the year with strong execution and continued product innovation. The company has been able to improve business performance across the board with intense sales activation, new product launches, and continued thrust on cost reduction.

For the first quarter of fiscal 2020, the company expects loss and negative cash flow. This reflected an extra week of plant shutdown for potential hard Brexit in addition to historical sales and production seasonality. In the subsequent quarters, profits are expected along with improving cash flow. The company is committed to competitive, consistent, cash-accretive growth over the medium to long term.

Shares of Tata Motors ended Friday’s regular session down 1.82% at $12.40 on the NYSE. Following the earnings release, the stock inched up 9.68% in the pre-market session.

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