Jaguar Land Rover Profit Hit By Brexit, Diesel Problems.
“another limp quarter, with profitability falling a long way from estimates”
Multiple threats from British Brexit uncertainties, dying European diesel sales and a weakening U.S. market are undermining Jaguar Land Rover’s (JLR) bottom line.
The threat to U.S. sales from possible increased import tariffs isn’t helping investor sentiment either.
In the year ended March 31, pre-tax profit fell £100 million to £1.5 billion as sales growth slowed to 1.7 per cent to 614,000 after the previous year’s 16 per cent jump. Pre-tax profit in the final quarter fell to £364 million from £676 in the same quarter last year. Profit margin fell to 5.9 per cent from 3.8 per cent.
Bernstein Research analyst Robin Zhu, commenting on the overall results of parent company Tata Motors of India, said JLR had another limp quarter, with profitability falling a long way from its estimates. JLR though continued to spend freely to build up its new model programme.
Investment set to grow
“Our question (to JLR after the results announcement) on when investment might peak went largely unanswered, leading us to suspect that the answer is ‘not any time soon ‘. Given JLR’s ongoing issues with U.K. cyclical headwinds, diesel uncertainty, cost inflation, and a weaker cycle of upcoming products launches, it seems all but certain to us that JLR will burn cash again (this fiscal year),” Zhu said.
The Financial Times’ Lex column saw many problems too, but one big potential Asian life saver.
“Tata Motors sees green lights in Asia and hold-ups everywhere else. A map of business conditions presented to analysts showed Brexit Britain flashing red while Europe’s diesel ban and slowing U.S. car sales carried amber warnings. If President Donald Trump’s review of his country’s car sector results in new tariffs, Tata will need to paint America red too,” Lex said.
Lex also said Tata shares looked over-valued compared with competitors like BMW and Mercedes. But there are some bright spots.
“Like every international carmaker, Tata needs to watch the Trump administration carefully. Large core markets in India and the U.K. leave it less at risk than some of its peers but developed market success remains just as important as emerging market growth,” Lex said.