Jaguar Land Rover crashes to £90 million loss
Jaguar Land Rover has crashed to a £90 million loss as falling sales slashed its income over the last three months.
The UK's biggest car maker, which manufacturers its engines at the i54 site in Wolverhampton, is already in the middle of a fortnight shutdown at its huge Solihull plant and running a three-day week at the Jaguar factory at Castle Bromwich to cope with the fall in demand.
Today it revealed the impact of the sales slide, racking up a £90m loss for the third quarter compared to a £385m profit at the same stage last year.
The number of cars it sold over the three months fell by 13.2 per cent compared to last year, down to 129,887 worldwide.
That has dragged down Jaguar Land Rover's revenue figure by 10.9 per cent, to £5.6 billion – around £700 million less than last year.
JLR said the fall in sales was largely due to 'challenging market conditions in China, where demand was adversely impacted by consumer uncertainty following import duty changes and escalating trade tensions with the US'. UK sales were hit by diesel taxation and regulations, alongside continuing uncertainty related to Brexit.
The company said it was seeing more challenging market conditions in current trading, with results undermined by slow demand in China and uncertainty in Europe.
JLR is now targeting improvements in its profitability and cashflow with two initiatives, called ‘Charge’ and ‘Accelerate’, to identify short-term cost and cashflow improvements as well as longer-term operating efficiencies.
It aims to improve profit, cost, and cashflow by £2.5 billion over the next 18 months. That will see it cut planned spending by £500 million to £4 billion per year this financial year and next.
JLR said its financial performance is expected to improve in the second half, and it now anticipates pre-tax profits to be about break-even for the full year ending March 31, 2019, ' impacted by the weaker than planned first half".
Chief executive Ralf Speth said: "In the latest quarterly period, we continued to see more challenging market conditions. Our results were undermined by slowing demand in China, along with continued uncertainty in Europe over diesel, Brexit and the WLTP changeover." The Worldwide Harmonised Light Vehicle Test Procedure is a set of newly introduced lab tests that measure fuel use and emissions.
"Given these challenges, Jaguar Land Rover has launched far-reaching programmes to deliver cost and cashflow improvements. Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable, profitable growth.
He added: "We remain focused on delivering improved profitability and cashflow in the second half, while pressing ahead with our product offensive. In the latest reporting period, we introduced important new models including the Jaguar E-Pace and the revolutionary electric I-Pace.
"Production has begun at our new plant at Nitra, in Slovakia. We have also continued our development of autonomous, connected and electrified products and services, which will shape our strategy for the future."
In North America, demand for SUVs remained strong, but overall sales were held back by slowing orders for passenger cars – in line with the market as a whole.
In Europe, sales were also affected by continuing weakness in diesel demand and the introduction of the new WLTP rules.
Total investment spending in the second quarter was £1 billion and cashflow after this investment was negative £624 million for the three-month period. Jaguar Land Rover strengthened its financial resources in the period by issuing a €500 million seven-year bond in September. The company ended the quarter with £2.6 billion of cash and a £1.9 billion undrawn credit facility. A $1 billion loan with a final maturity in 2025 was also completed in October.
In terms of new product introductions, Jaguar Land Rover is currently launching the Jaguar I-Pace in North America, China and other Overseas markets and the electric Jaguar E-Pace has recently joined the line-up in China. Further model introductions will include the next-generation Defender.