Rising input costs: Tata Motors’ net loss widens in Q2

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November 02, 2021 6:30 AM

Total revenue from operations rose on a consolidated basis rose to Rs 61,378.82 crore, a 14.66% rise from Rs 53,530 crore posted last year.

Tata Motors on Monday posted a consolidated net loss of Rs 4,415.47 crore during the July-September quarter, wider than Rs 307.26 crore a year ago as the company was impacted by semiconductor shortage and rising input costs. A Bloomberg consensus estimate had pegged the company’s net loss at Rs 3,681-crore.

The straight third-quarter loss for the firm, which was also much higher than the Street estimates, was also due to higher expenses and lower vehicle sales by its British arm, Jaguar Land Rover (JLR).

Total revenue from operations rose on a consolidated basis rose to Rs 61,378.82 crore, a 14.66% rise from Rs 53,530 crore posted last year.

“The semiconductor shortage is a temporary issue and we don’t see it impacting our long-term plans. While commodity costs and rising fuel prices also had their impact, we are seeing sales of compressed natural gas and electric vehicles picking up,” group chief financial officer PB Balaji said in an interaction with reporters.

“We are seeing an improvement in the economy and in the passenger vehicle segment in the country,” he added.
On a standalone basis, Tata Motors pared the net loss to Rs 659.33 crore (from Rs 1,212.45 crore a year ago), while its total revenue from operations nearly doubled to Rs 10,996.02 crore (Rs 5,594.60 crore).

The semiconductor shortage mainly reflected in the sales of its JLR vehicles. During the quarter, JLR posted a revenue of 3.9 billion pounds with a pre-tax loss of 302 million pounds, while free cash outflow was 664 million pounds.

The free cash outflow was significantly better than prior guidance for a 1 billion pounds, reflecting “prioritised production of higher margin products and cost controls to reduce the cash break-even point further”, Tata Motors said in a release.

“The global semiconductor shortage remains challenging but I’m pleased to see the actions we have been implementing reducing the impact. With a strong customer demand and a record order book we are well-placed to return to strong financial performance as semiconductor supply begins to improve,” JLR chief executive officer Thierry Bollore said.

JLR’s wholesales to the dealers during the reporting quarter were down 12.8% year-on-year at 64,032 vehicles, and retail sales (including its China joint venture) were 18.4% to 92,710 units.

The semiconductor shortage remains “dynamic and difficult to forecast”, however, JLR expects to see gradual recovery starting in the second half of FY22. JLR will also continue to take mitigating actions, it added.

Tata Motors’ India operations showed significant improvement, compared with the same quarter a year ago, however supply chain issues and commodity inflation impacted the margins. Passenger vehicle business continued post a turnaround, while EV business recorded a near three-fold growth with recorded highest monthly and quarterly sales of 1,078 units and 2,704 units, respectively.

Tata Motors business scenario continues to show gradual improvement, while there are “significant challenges” on the supply side including semiconductor issues and sharp commodity inflation.

“Looking ahead, we expect the demand for commercial, passenger and electric vehicles to remain strong even as concerns about the supply of semiconductors and high input costs continue. We are taking definitive actions in the near term to mitigate these effects…,” Girish Wagh, executive director at Tata Motors, said. Ahead of the earnings announcement, Tata Motors shares closed up 0.40% at Rs 485.70 on the BSE.

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