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Tata Motors Q1 hit hard by Covid-19 pandemic, flags uncertain outlook: Key takeaways – Economic Times

Mumbai: The Covid-19 pandemic weighed heavily on the performance of Tata Motors in the quarter ended June as the automaker’s losses widened, and it stared at an uncertain outlook for the year.

The company reported a net loss of Rs 8,437.99 crore for the quarter ended June, compared with a loss of Rs 3,698.34 crore in the corresponding quarter last year. An ET Now poll had expected the auto major to post a Rs 7,700 crore loss for the quarter.

Here are the key takeaways from Tata Motors’ Q1 earnings:

Uncertain outlook
The company said its outlook remains uncertain for the year with infections continuing to rise and intermittent lockdowns in many countries, but it expects a gradual recovery of demand and supply in the coming months.

Focus on cost savings
The company said it is committed to significantly deleveraging the business in the coming years and aim to generate positive free cash flows over the last 3 quarters of the year by focusing on better front end activations of its product range, and executing cost and cash savings with rigour.

Jaguar Land Rover (JLR) slumps
JLR’s net revenue declined 44 per cent to 2.9 billion pounds during the quarter under review and as a result, it posted a loss before tax of 413 million pounds as Covid-19 resulted in temporary retailer and plant shutdowns, significantly impacting sales and profits.

“However, the transformation programme continued to gain momentum resulting in positive EBITDA despite significant volume drop in the quarter and lower cash outflow as compared to the earlier expectations. Project Charge delivered £1.2 billion of cost, profit and cash flow improvements in the quarter,” the company said while commenting on JLR results.

JLR outlook
Sales of the new Land Rover Defender started to ramp up in the UK, Europe and North America with China and other markets starting from July onwards, the company said. The expected recovery in sales will also be supported by the newly revealed enhancements to the Range Rover and Range Rover Sport, it added.

For the rest of FY21, JLR said it will continue to manage costs and investment spending rigorously. After realising £1.2 billion of total cost and cash improvements under Charge+ in the quarter, the company has increased its target for FY21 from £1.5 billion o £2.5 billion.

Tata Motors standalone
Revenue for the quarter decreased 80 per cent to Rs 2,700 crore and pre-tax loss before exceptional items was Rs 2,141 crore (against pre-tax loss of Rs 40 crore in Q1FY20) due to steep volume decline and negative operating leverage.

Tata Motors’ outlook
The company said it expects gradual pickup in demand and supply situation on the back of overall economic recovery expected in H2FY21, and it will focus on conserving cash by rigorously managing cost and investment spends to protect liquidity.

It has called out a cash improvement program of Rs 6,000 crore including a cost improvement program of Rs 1,500 crore, while capex is expected to be around Rs 1,500 crore for FY21. Due to these, the company expects improving cash flows for the remainder of the year and expects to end FY21 with positive free cash flows.

Management commentary
Even as we continue to address the challenges, we see some disruption due to the intermittent shutdowns and supply chain bottlenecks,” said Guenter Butschek, CEO and MD, Tata Motors.

“We have witnessed some green shoots emerging in PV owing to some pent up demand pre-Covid, and are hopeful for a full recovery of the CV industry by end of the fiscal year, with a gradual pickup of demand, aligned to the economic recovery,” he added.