International BusinessJLR on road to revival
Eighteen months after Tata Motors took over beleaguered luxury brands, Jaguar and Land Rover, a strategy of cost-cutting and pushing sales have helped the UK labels to post an operating profit of £41 million (Rs 314.55 crore) during the reporting quarter ending 30 September 2009.
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The losses in Jaguar and Land Rover (JLR) shrank to £60 million (Rs 460.32 crore) in the reporting quarter as against a loss of £240 million (Rs 1841.28 crore) in the corresponding period, said the company’s Chief Financial Officer, C Ramakrishnan.
The turnaround in JLR also helped Tata Motors to post a consolidated net profit of Rs 21 crore for the second quarter ended 30 September 2009, as against Rs 941 crore loss in the same period a year ago.
JLR was not a part of the Tata Motors consolidated numbers during the same period last year as they were only shown separately from the start of the first quarter of this financial year. The net loss at JLR during the first quarter stood at £64 million (Rs 491 crore).
Sales (dispatches from factories) of JLR vehicles also showed a growth of 23 per cent to 44,300 units during the second quarter as against 35,900 units posted in the first quarter. The UK market reported the strongest surge of 34 per cent, selling 14,400 of JLR units, while the North American market and the European market (excluding Russia) posted a fall of 7 per cent and 17.8 per cent, respectively.
Tata Motors non-executive vice chairman Ravi Kant said, “A lot of restructuring has happened at JLR but these are early days. We will continue with the cost reduction measures.” The company has hired KPMG International and Roland Berger Strategy Consultants to help cut costs at the two brands.
The company has also hinted at shutting one of the JLR plants to help achieve better consolidation but has repeatedly refused to disclose the plant name. It has already retrenched 2,200 employees of JLR since it took over the management. Gross consolidated sales of Tata Motors for the reporting quarter stood at Rs 21,597 crore, a decline of 9 per cent as compared to Rs 23,770 crore reported in the same period a year earlier. The company also posted a notional exchange loss of Rs 163 crore for the quarter, as compared to Rs 1,422 crore on revaluation of foreign currency.
The stand-alone debt on the books of JLR as of today is at Rs 9,000 crore, as against about Rs 4,500 crore during the same period last year. The total debt on a consolidated basis on the books of the company is at Rs 21,000 crore, with the debt to equity ratio of 4:1. “We had operated at 1:1 level earlier and we would like to be there again,” said Ramakrishnan, while declining to provide any time line. “We will continue to look at unlocking value to raise capital,” he added.
The company also said that it is in the process of finalising guarantee arrangements to access a £340 million loan approved by the European Investment Bank. These funds will be used to develop new technologies for JLR. The company had posted a net profit increase of 110 per cent to Rs 729 crore on a stand-alone basis for the second quarter, as compared to Rs 346.99 crore posted during the same period a year ago.