Tuesday, 12 August 2014

JLR to edge beyond £1 billion quarterly profits

Jaguar Land Rover Automotive plc (JLR) achieved profit before tax of nearly £1 billion for the first quarter of its 2014/2015 financial year.

The company’s strong sales volumes have resulted in revenues for the period of £5.353 billion.

With an actual profit before tax increased to £924m for the quarter, this reflects the growth in volumes and revenue as well as strong product and geographic mix. 

Retail sales in the quarter increased 22 per cent year-on-year to 115,596 vehicles. This reflects solid global demand for new and refreshed Jaguar and Land Rover product, including Range Rover, Range Rover Sport, Range Rover Evoque and the Jaguar F-Type.  

The profits are more than double the £415 million recorded in the first three months of the 2013/2014 year.

The figures also have overhauled the company’s best-ever quarter results of £842 million achieved in the third period of last year which, when compounded with other results, secured a record full-year profit of £2.5 billion for the year.

Commenting on the results, JLR chief executive officer, Dr. Ralf Speth said: "This financial performance reflects Jaguar Land Rover's award-winning product portfolio.  We are committed to inspire customers with exceptional premium vehicles, delivering the highest standards of quality, technology and customer service.  We delight people with experiences that they will love, for life."

JLR’s strong sales growth has helped to counter a 28 per cent fall in Tata’s domestic vehicle sales. The British company’s performance has also helped the net profits of Tata to increase three-fold to £525 million in the three months to the end of June.

The company appears on track to invest £3.5 billion in products and facilities in the financial year to March 2015. Part and parcel of this will be the upcoming aluminium-intensive Jaguar XE ‘Baby Jag’ that will be launched in London on 8 September.

This new car will be manufactured in a £1.5 billion purpose-built, state-of-the-art facility on the company’s Solihull site which has been the traditional ‘home’ of Land Rover since the end of the Second World War.

For the first time, an aluminium-intensive car will be put together in high volume using joining technologies hitherto confined to lower-volume vehicles.

And the XE will be the first Jaguar to benefit from a new and unique family of four-cylinder gasoline and diesel engines that will be machined, assembled and tested at the company’s new engine plant in Wolverhampton that will have capacity to make more than 300,000 engines a year – a figure previous generations of Jaguar plant managers could only dream about in their most delirious moments.

The coming together of these two brand-new (and untested in the heat of manufacture) technologies – body-in-white and powertrain – could only serve to accelerate the company’s already heady performance.

All eyes, in Britain, Europe and the US – not to mention India and China – will be keenly watching to see what happens in the next 12 months.

Christian Stadler, Warwick Business School Associate Professor of Strategic Management, said: “JLR has been a great success for Tata. The Indian economy has grown by less than five per cent over the past two years. This affected the mass market, whereas the market JLR is targeting, the high end, has been doing well.”

“China is an extremely important market for JLR along with other emerging markets. Whenever economic strains strike the mass markets feel it more, because rich people can still afford to buy cars,” he added.

“Most acquisitions fail, but Tata has employed a new approach that seems to be used by a number of successful Indian conglomerates. The acquisition is followed not by ruthless integration but partnership. They take a very hands-off approach. They might shape the composition of the top management and provide capital but do not try to run the day-to-day operations. Most Western companies are considerably more interfering. When Ford owned JLR, they certainly were more involved. Synergies are less of a concern than for Western companies,” Stadler noted.

“Tata supported JLR financially at the beginning and made sure that communication between JLR and Tata Motors was in place, but JLR have more or less been allowed to do their own thing, especially where the operations are concerned. That is something of a new phenomenon,” he added.

Stadler concluded by noting that “JLR CEO Ralf Speth has come from BMW, which is also doing very well. This might be a coincidence but it does point at ‘thinking along the same lines’. He is very down to earth and not a charismatic dreamer. He knows the ins and outs of the car industry and gets things done.”

Speth ought to know, if anyone does, what is required to build a car that can beat a BMW in terms of fit and finish, and vehicle dynamics.

However, to what extent Tata Motors gives JLR executives real experience of a “very hands-off approach” and a free hand to manage their businesses is known only to those who sit round the boardroom table to plan and execute strategy, and manage day-to-day activities. As in many companies, JLR's boardroom holds tight its many secrets.

Board members have already reviewed "state of play" and outstanding issues concerning the new state-of-the-art engine manufacturing centre at Wolverhampton.

Meanwhile, last month JLR announced its best-ever half yearly sales of 240,372 vehicles. It delivered more vehicles in the first six months of this year than in the whole of 2010 – such is the magnitude of change that Tata Motors appears to have brought about.

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