Tata Motors dips ~3% after reporting consolidated loss of Rs1,516cr in Q3FY22

1 Feb 2022 , 09:18 AM

Tata Motors Limited posted consolidated loss of Rs1,516cr in the quarter ended December 31, 2021 against profit of Rs2,906.5cr in Q3FY21, revenue fell to Rs72,229.3cr from Rs75,653.8cr yoy.

Tata Motors, the owners of the Jaguar and Land Rover (JLR) brands, reported a quarterly loss on Monday, weighed down by higher commodity prices and the global chip shortage.

Microchips are a key component in car manufacturing but automakers around the world have been hamstrung by limited supplies due to semiconductor production cuts during the pandemic.

Consolidated EBITDA at 10.2% (-460 bps), EBIT at 1.7 % (-470 bps). JLR Revenue £4.7b down 21.2%, EBITDA at 12.0%, EBIT at 1.4%. Commercial Vehicles (CV) revenue up 28.7%, EBITDA at 2.6% (-540 bps); PV revenue up 72.3%, EBITDA at 4.2% (+40 bps).

The company stock was under pressure during early trade on Tuesday despite bullish markets. At around 9.24 am, Tata Motors Ltd was trading at Rs502.60 per share down by Rs14.9 or 2.88% from its previous closing of Rs517.50 per share on the BSE.

JLR Highlights

• Q3FY22 revenue of £4.7 billion up 22% from Q2, with wholesales up 8% from Q2 but down year on year
• Q3 EBIT margin of 1.4% and free cash flow £164 million reflecting improvements in wholesales, mix and cost efficiency, while PBT was (9)m
• Order book hits new record of c. 155,000 units, up to c. 30,000, reflecting strong demand for the New Range Rover
• Refocus transformation programme delivers £1 billion of value year to date and is now expected to achieve £1.4 billion of value in FY22, beating our £1 billion target
• Liquidity of £6.5 billion at quarter-end, including £4.5 billion of cash and a £2 billion undrawn revolving credit facility, after new £625 million amortising 5-year loans 80% guaranteed by UK Export Finance and syndicated to 12 banks

Financials

• Wholesales to dealers in Q3 were 69,182 units, up 8% on Q2 FY22 with production volumes up 41% to 72,184 units. Overall, however, sales remain significantly constrained by chip shortages and low inventories with retail sales in Q3 of 80,126 vehicles, down 13.6% from Q2 FY22 and 37.6% from Q3 FY21.
• The mix of electrified retail sales (BEV, PHEV and MHEV) increased to 69% in Q3 compared to 53% a year ago. While regional sales broadly followed total sales, model mix was stronger with wholesales of the Range Rover model family up 30%. Demand remains strong with a record order book of almost 155,000 vehicles, up 30,000 units from Q2 reflecting strong demand for the New Range Rover, with deliveries for the model to start later in Q4 FY22.
• For Q3, revenue was £4.7 billion, up 22% from Q2 FY22. EBIT margin improved from Q2 to 1.4% and free cash flow improved to £164 million, reflecting the increased wholesale volume, more favourable mix, pricing and FX, partially offset by a provision for quality campaigns. PBT was a £(9) million loss in the quarter.
• The Refocus transformation programme has delivered £1 billion of value in the first three quarters of FY22 through digital initiatives, market performance, cost efficiency and investment. The programme is now expected to achieve £1.4 billion of value in FY22, beating the original £1 billion target.

Looking ahead

• The semiconductor shortage is expected to continue through 2022 but is expected to gradually improve as capacity within the supply base increases, while the Company is also engaging with first-tier suppliers and directly with the chip manufacturers to secure supply longer-term. With this gradual expected improvement, Jaguar Land Rover expects Q4 profits to improve from Q3 with positive cashflow.
• JLR’s medium- and longer-term financial targets under the Reimagine strategy, underpinned by the Refocus transformation programme, remain unchanged, including increasing EBIT margins to 10% or more by FY26.

Thierry Bolloré, Jaguar Land Rover’s Chief Executive Officer, said: “Whilst semiconductor supplies have continued to constrain sales this quarter, we continue to see very strong demand for our products underlining the desirability of our vehicles. The global order book is at record levels and has grown an incredible 30,000 unitsfor the New Range Rover before deliveries even start this Quarter. We continue to execute our Reimagine strategy to realise the full potential of the business and create the next generation of the most desirable luxury vehicles for the most discerning of customers.”

JLR: Sales remain constrained by chip shortages with retail sales of 80,126 vehicles, down 37.6% over Q3FY21. The chip supply situation is gradually improving with production volumes of 72,184 units up 41% over Q2 FY22 and wholesales of 69,182 units up 8% on Q2FY22. For Q3, revenue was £4.7 billion, up 22% from Q2 FY22. EBIT margin was 1.4% and free cash flow was positive at £164 million in Q3 FY 22, demonstrating the progress JLR made in reducing the breakeven point in the business through mix optimisation and cost efficiencies.

TML: India operations showed significant revenue improvement as compared to Q3 a year ago, however commodity inflation impacted the margins. As a result, TML reported EBIT of (1.7)% and pre-tax loss (before exceptional items) of ₹ 0.8K Cr for Q3FY22. PV business continued its turnaround journey and strengthened its double-digit market share with highest sales in any calendar year since inception. EV sales witnessed a new peak of 5,592 units in Q3FY22.

Outlook: The demand remains strong despite near term concerns from Omicron spread. The semiconductor supply situation is improving gradually whilst inflation worries persist. Over the last two years, the resilience of the business has improved, and it is now intrinsically stronger. With concerted actions in place to address the near-term supply and cost challenges, we expect performance to improve further in Q4FY22 and beyond.