Tata Motors Limited ADR (NYSE: TTM) stock rose 5.5% on 20th May, 2019 (As of 1:13 pm GMT-4; Source: Google finance). The company faced significant growth in JLR US driven by new models and industry trends. JLR has outpaced industry and improved market shares due to expanded Land Rover and new Jaguar PACE model lineup. Land Rover has positively benefited due the industry switch from cars to trucks and SUVs as well as growth from new products primarily Discovery and Velar.
The company in the fourth quarter of FY 19 has reported a 47% fall in net profit due to lower revenue from operations. The results were affected by asset impairment at Jaguar Land Rover and separation costs. In Jaguar Land Rover, the company continued to face challenges in China. However, the results exceeded the analysts’ expectations.
Net profit attributable to shareholders fell by 47% to INR1,117.48 crore. Earnings per ordinary share declined by 47.4% to INR3.28 and earnings per class A ordinary share fell by 47% to INR3.38. Total consolidated revenues fell by 4% to INR86,422.02 crore. Revenue from Tata Motors Limited (TML) segment rose by 3.7% while revenue at JLR fell by 5.2%. Total volumes fell by 8.2% to 357,219 units. Free cash flow (automotive) in the year 2019, was negative ₹9,166 Cr reflecting lower operating profits at JLR.
In JLR, the company continued to face challenges in China. Tata Motors has taken strategic steps to lower breakeven and improve cash flows in order to combat the volatile external scenario.
In JLR, the rising sales in UK and US contributed to revenues growth, and has invested GBP3.8 billion in product development, new technologies, expanding manufacturing footprint, and streamlining product creation process. The company has faced weak market conditions in China with a 5.6% decline in the total passenger vehicle market.
In the TML segment, the fourth quarter market conditions is still adverse due to significant stress on liquidity, higher capacity arising from axle load norm changes and lower economic activity. The commercial and passenger vehicles continued to post strong growths in the year 2019 with strong execution and continued product innovation.
Additionally, the company has recommended a dividend of ₹ 1.0 per Ordinary Share of 2/- each and ₹1.10 per ‘A’ Ordinary Shares of Rs. 2/- each for FY19;subject to approval of shareholders
For the first quarter of FY20, the company expects loss and negative cash flow. This reflected an extra week of plant shutdown for potential hard Brexit in addition to historical sales and production seasonality. In the subsequent quarters, profits are expected along with improving cash flow