With quarterly volumes hitting one lakh units, JLR has set itself a target of 2 billion pounds of free cash flow and a shave off net debt from 3 billion pounds to 1 billion pounds
17 May 2023 | 7216 Views | By Ketan Thakkar, Shahkar Abidi and Shruti Mishra
In a bid to protect itself from the volume’s volatility in the future, Tata Motors-owned Jaguar Land Rover (JLR) has brought down the breakeven point to three lakh units annually. The break-even point has almost halved from close to the six lakh units range it had at the end of ...
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In a bid to protect itself from the volume’s volatility in the future, Tata Motors-owned Jaguar Land Rover (JLR) has brought down the breakeven point to three lakh units annually. The break-even point has almost halved from close to the six lakh units range it had at the end of FY19.
With wholesale volumes of 3.24 lakh units in FY23 and an orderbook of over two lakh units, JLR is well on its way to four lakh units in the current financial year, which will set the company on the path to free cash flow of 2 billion pounds this financial year and bring down the net debt to 1 billion pounds.
A series of cost cutting measures undertaken by the company over the last few years has helped Jaguar Land Rover prune its breakeven point and deliver strong returns. This has been a culmination of numerous initiatives undertaken by the company from Charge, Charge + and Refocus plans, which had led to savings of over 6-8 billion pounds over the last half a decade.
The refocus transformation programme exceeded the full year target with £1.1 billion of savings in FY23, said the company post Q4FY23 earnings. The rich product mix, reduced marketing expenditure, better working capital management and lower costs have helped JLR to move in this direction.
P B Balaji Group CFO told media persons post the Q4 earnings, “The key drivers for the profitability improvement have been higher volumes and a stronger mix. The cash flow breakeven is now down to three lakh units. The orderbook at two lakh units remains strong with Range Rover, Range Rover Sport and Defender accounting for 76 percent of the orderbook.”
Reviewing the Q4 earnings, Balaji expressed satisfaction on the quarter and said, all the initiatives are coming together nicely.
“All automotive verticals posted robust performance, leading to multiple all time high achievements for Tata Motors, including the highest ever revenue of Rs 3.5 lakh crore, highest EBITDA of 37,000 crore and all these despite the challenges that we had in the earlier part of the year. It is quite satisfying, all the automotive businesses delivering in unison on their well differentiated strategies,” he said.
On the way ahead, Balaji said the company aims to further improve on its strong performance in FY24 and this momentum is likely to build throughout the year. “Factoring in seasonality and stabilisation of the JLR supply chain. It has been a satisfying quarter, with all the cylinders firing in unison, we hope to repeat the performance in FY24 as well,” he added.
India business net debt is the lowest in 15 years at Rs 6,200 crore.
Tata Motors had recently announced a long-term commitment of Rs 1.5 lakh crore for JLR or 15 billion pounds in the next five years, as JLR accelerates the transition to Zero emission space.
JLR hit a quarterly volume of one lakh units in Q4FY24, helping Tata Motors post its highest ever quarterly revenues and highest ever EBITDA in Q4FY23 with the strongest profit before tax helping in a strong debt reduction during the last financial year.
In Q4, JLR revenue stood at 7.1 billion pounds, which is the highest revenue since FY19. EBITDA of 14.6 percent, 6.5 percent EBIT, strong PBT and 850 million pounds of cash in the quarter. For the second half of the year, JLR generated cash of 1.3 billion pounds, which also is the strongest H2 cash performance for seven years, since FY16.
The company had a free-cash flow of 521 million pounds for FY23, its best full-year cash-flow since FY16. It ended the year with 8 billion pounds worth of cash and 5.3 billion pounds worth of liquidity, with the net debt at 3 billion pounds.
Jaguar Land Rover has already kicked off its ambitious EV journey with its Reimagine strategy. Between now and FY26, it plans to launch half a dozen Land Rover EVs and by then all the Jaguar cars will transition to zero emission vehicles.
The company is currently sitting on an orderbook of two lakh units. The bookings for the new Range Rover EV will start from October and the company plans to launch the car in 2024.
With an expected strong cash flow, Tata Motors is confident of shaving off almost Rs 20,000 crore of debt in JLR in the next financial year and bringing it down to Rs 10,000 crore and eventually it wanted to transition to zero debt by FY25. The company posted its best financials from China JV in five years in FY23.