Published: Fri, February 08, 2019
Finance | By Loren Pratt

Tata Motors stocks plunge most in 26 years after Q3 results

Tata Motors stocks plunge most in 26 years after Q3 results

Last month, the UK's largest auto company announced plans to slash around 10% of its workforce (more than 4,500 employees globally), and JLR owner Tata Motors says the £2.5 billion (RM13.15 billion) savings from the programme will boost cash flow through 2020.

"Performance was impacted by challenging market conditions, particularly in China and inventory corrections".

Tata Motors turned in a third-quarter loss of 269.93 billion rupees ($3.8 billion) on Thursday, more than half its current market capitalization of $6.1 billion, mostly due to a massive impairment at JLR.

The company took a non-cash charge of Rs 27,838 crore ($3.90 billion) to cover the impairment at JLR in the three months to December 31.

Tata Motors wrote down its investment in Jaguar Land Rover by $3.9 billion due to market challenges, especially in China, technology disruptions and rising debt costs.

Commenting on the step, JLR Chief Executive Ralf Speth said, "We are announcing a non-cash exceptional charge to reduce the book value of our capitalised investments". The company also had a £1.9bn undrawn credit facility available at the end of the quarter. "With these interventions, we are building Tata Motors group to deliver strong results in the medium term".

JLR's China retail sales nearly halved in the quarter as demand for cars from the Asian economic powerhouse shrank for the first time since the 1990s. The £273 million pre-tax loss compares with a £90 million loss in the previous quarter of 2018, running from July until September. At the same time, investment in new models, electrification and other technologies remains high, he added. This is expected to result in a one-time exceptional redundancy cost of around £200m.

The loss was reported on 5% growth in revenues to Rs 77,000 crore. Sales rose by a fifth year on year in the quarter in the United States and by 18% in the UK.

Dr Speth added: "This is a hard time for the industry, but we remain focused on ensuring sustainable and profitable growth, and making targeted investments, that will secure our business in the future".

"Fiscal year 2019 so far has been a challenging period for the industry. Despite the muted growth, Tata Motors has delivered strong results, registered an impressive profitable growth this year on the back of exciting products, renewed brand positioning and aggressive cost reduction", Tata Motors CEO and MD Guenter Butschek said.

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