Tata Motors Q4 takeaways: Outlook challenging, but recovery still on track

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MUMBAI: left investors surprised as it reported a mammoth consolidated net loss of over Rs 7,500 crore due to exceptional losses related to subsidiary Jaguar Land Rover.

The company’s consolidated net losses narrowed from the year-ago quarter, which was marred by Covid-related lockdowns across major markets such as India, China and Europe.

“The business has demonstrated strong resilience in the face of adversity and its fundamentals are strong,” the company said in its earnings statement in a reminder to investors that it remains on the right track.

Here are the major takeaways from the carmaker’s March quarter earnings:
Another write-off shocker from JLR
A year ago, Tata Motors wrote down the value of JLR’s inventory given the ravages of the pandemic on the global automobile market. A year later from that large loss, the company decided to further write down over $1 billion due to cancelled models of the luxury carmaker. The write down this time around is part of the company’s ‘Reimagine’ strategy that is expected to make it a leader in the luxury electric vehicle market.

Topline shows recovery on track
Tata Motors’ consolidated revenues jumped 42 per cent and were above analysts’ expectations, suggesting that the company remains on track of recovery led by the Indian operations where sales more than doubled during the quarter. JLR posted over 20 per cent growth, indicating the recovery in key markets like China and North America.

Outlook challenging in near term
Tata Motors said that while demand remains strong, the company is facing challenges on the supply front, especially due to global semiconductor shortage. “The supply situation over the next few months is likely to be adversely impacted by disruptions from Covid-19 lockdowns in India and semiconductor shortages worldwide. We expect Q1FY22 to be relatively weak due to this as well as rising commodity inflation, and expect to improve gradually from the second quarter,” the company said.

Cash generation to soothe investors

JLR delivered on its promise of generating positive free cash flow quarter after quarter. The company reported positive free cash flow of 729 million pound sterling for the quarter ended March, and nearly 200 million pound sterling for the financial year. JLR said that it will target earnings before interest and tax margin of 4 per cent in 2021-22 and break-even free cash flow.

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