Jaguar Land Rover posts biggest quarterly loss of £3.4bn | Business

Jaguar Land Rover announced its biggest quarterly loss on Thursday after it was forced to take a £3.1bn writedown on the value of its investments as Chinese demand slumped.

Britain’s largest car manufacturer, which is owned by India’s Tata Group, made a £3.4bn pre-tax loss in the last three months of 2018 as sales fell. It anticipates a loss for the financial year as a whole for the first time in a decade.

Half of £3.1bn non-cash charge was taken after JLR accepted that previous investments in property and machinery were worth far less than previously thought. The other half was attributable to goodwill impairments, an accounting correction that recognises that future earnings potential is likely to be diminished.

Car manufacturers across the world are facing many challenges, from regulatory pressure on diesel demand, the transition to electric vehicles and Brexit uncertainty. This has prompted JLR and others to bring forward factory shutdowns to April, when Britain is scheduled to leave the EU.

At the same time, JLR has been particularly badly hit by slowing demand in China, where it has also suffered from competitors’ pressure on its relationships with dealers.

The company, which employs 18,500 manufacturing staff in the Midlands and Merseyside, last month said it will cut 4,500 jobs in response to the challenges. The majority of the cuts are expected in UK management roles, costing the company £200m. On Thursday, Tata said there will be no further job losses beyond those already announced.

Excluding the one-off accounting charge, JLR lost £273m before tax during the last quarter. This is a significant increase on its £90m loss in the previous quarter and a £192m profit a year earlier. Revenues fell by £100m to £6.2bn as vehicle sales fell to 144,602 for the quarter, almost 10,000 less than the previous year.

Ralf Speth, JLR’s chief executive, said: “Jaguar Land Rover reported strong third-quarter sales in the UK and North America but our overall performance continued to be impacted by challenging market conditions in China.”

Last year, JLR launched a £2.5bn programme of cost-cutting and working capital improvements in an attempt to turn the company around. It delivered £500m of the programme in the third quarter.

Speth said the turnaround programme will enable the firm to “counter the multiple economic, geopolitical, technological and regulatory headwinds presently impacting the automotive industry”.

Source link