Tata Motors on Thursday reported a whopping loss of Rs 26,960.8 crore for the third-quarter ended December 31, 2018 — its biggest ever for a three-month period — as it booked a one-time asset impairment charge in Jaguar Land Rover.
This is the third consecutive quarterly loss reported by the company. Analysts had expected the company to report profits.
Tata Motors disclosed profit was adversely impacted by an exceptional item of asset impairment in JLR of Rs 27,838 crore (£3.1 billion). It had posted a net profit of Rs 1,214.6 crore in the same quarter of the last fiscal.
“Given the muted demand scenario and the associated impact on the financials, JLR has concluded that the carrying value of capitalised investments should be adjusted down, resulting in a non-cash £3.1 billion pre-tax exceptional charge and an overall pre-tax loss of £3.4 billion for the quarter,” Tata Motors said in a statement.
JLR has been affected by the trade tensions between the US and China amid low demand for diesel cars in Europe.
“We are announcing a non-cash exceptional charge to reduce the book value of our capitalised investments,” JLR chief executive Ralf Speth said. He said the automotive industry is facing significant market, technological, and regulatory headwinds.
Speth, however, said investment in new models, electrification and other technologies remains high.
“The point is there is one-time impairment charge that is being taken so this is not fair to compare this to past,” Tata Motors group CFO P.B. Balaji said.
JLR's retail sales were lower by 6.4 per cent to 1,44,602 units in the third quarter because of difficult market conditions in China, though it was offset by encouraging growth in North America and the UK.
Sales in Europe were slightly higher despite an 8 per cent drop in the overall market. The company reported revenues of £6.2 billion compared with £6.31 billion in the year ago period and a pre-tax loss before exceptional items of £273 million against a profit of £ 190 million.
“The financial results mainly reflect the lower sales in China and higher depreciation and amortisation of investment expense,” it said.
However, on a standalone basis, Tata Motors posted a profit after tax of Rs 617.62 crore against Rs 211.59 crore in the same quarter a year ago.
Total standalone income rose to Rs 16,477.07 crore against Rs 16,186.15 crore in the same period previous fiscal.
Tata Group chairman N. Chandrasekaran said the company’s domestic business maintained its strong momentum and has delivered market share gains as well as profitable growth.
'The turnaround 2.0 strategy is delivering well with a continuing portfolio of product launches, which are the requisite building blocks for sustainable growth,' he observed.
