Tata Motors-led JLR expects positive EBIT margin, cash flow in second half of FY22; Q1 revenue rises 74% yoy

The production constraint resulted in a pre-tax loss of £110 million with an EBIT margin of (0.9)% and a free cash outflow of £996 million.

Jul 27, 2021 12:07 IST India Infoline News Service

Tata Motors
Tata Motors-backed, luxury car subsidiary, Jaguar Land Rover recorded revenue of £5.0 billion in the first quarter of FY22, 73.7% higher than Q1 in the prior year, reflecting a 72.6% year-on-year growth in wholesales to 84,442 vehicles, however, this was c. 30,000 units lower than planned due to semiconductor supply constraints. The production constraint resulted in a pre-tax loss of £110 million with an EBIT margin of (0.9)% and a free cash outflow of £996 million.

Further, JLR's cash outflow is after £571m of investment spending and unfavourable working capital of c. £800 million related to the lower production. Nevertheless, these results represent a significant improvement from the loss of £413 million and cash outflow of £1.6 billion at the peak of the pandemic in Q1 a year ago.

On segment-wise, JLR's retail sales in the first quarter were 124,537 vehicles, up 68.1% year-on-year as sales continued to recover from the impact of the pandemic.

On geographic-basis, the company's retail sales in the first quarter were 124,537 vehicles, up 68.1% year-on-year as sales continued to recover from the impact of the pandemic. Sales were higher in all key regions including in the UK (+186.9%), Europe (124.0%), Overseas (71.0%), North America (50.5%), and China (14.0%). Retail sales of all model families increased year-on-year, led by Range Rover and Defender models. Electrified vehicles made up 66% of JLR’s retail sales in Q1 (2.0% BEV’s, 6.5% PHEV and 57.1% MHEV.)

Thierry Bolloré, Jaguar Land Rover Chief Executive Officer concluded, "“We are pleased to see a continuing positive recovery from the pandemic, with year-on-year growth in all regions, demonstrating the appeal of Jaguar and Land Rover vehicles. Though the current environment continues to remain challenging, we will continue to adapt and manage elements that are within our control and ensure that Jaguar Land Rover is well-placed to respond to any further market developments. We remain encouraged by the sheer strength of the demand for our vehicles, and note the success of our electrified powertrain offering as we work to drive that demand further by reimagining our iconic British brands for a future of modern luxury by design. We have the right vision with Reimagine, and we are already on the journey."

JLR's  medium- and longer-term financial targets under the Reimagine strategy, underpinned by the Refocus transformation programme, remain unchanged, including double digit EBIT margins by FY26. Jaguar Land Rover continues to see strong demand for its products. The company presently has about 110,000 global retail orders, the highest in the history of the company, representing 3 months of sales cover, with 5 months in Europe and 4 months in the UK. Orders for the Defender alone total over 29,000, representing over 4 months of demand.

Despite the spread of the Delta variant, the continued increase in Covid vaccination rates is encouraging for the ultimate recovery of the global economy and automotive industry. The shortage of semiconductors is presently very dynamic and difficult to forecast. JLR now expects semiconductor supply shortages in the second quarter ended 30 September 2021 to be greater than in the first quarter, potentially resulting in wholesale volumes about 50% lower than planned. JLR expects the situation will start to improve in the second half of the financial year.

In the second quarter, JLR expects a negative EBIT margin with a free cash outflow of less than £1 billion. As semiconductor supply improves, JLR expects to achieve a positive EBIT margin and positive free cash flow in the second half of the financial year. 

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