With semiconductor supply shortages easing, Jaguar Land Rover reported a positive free cash flow and profitability in the third quarter as demand for its vehicles improved.
Jaguar Land Rover reported a free cash flow of £490 million ($606.9 million) for the third quarter of fiscal year 2023, up from £164 million ($202.9 million) year-over-year. Margin on its Earnings Before Interest and Taxes (EBIT) was 3.7 percent.
The British automaker stated its profit before tax was £265 million ($328.2 million), up from a loss before tax of £9 million ($11.1 million) in the third quarter of fiscal year 2022. After tax profit in the quarter came in at £261 million ($323.1 million), an improvement from the £67 million ($82.9 million) loss incurred during the same period a year before.
The company also reported stronger wholesale demand, with volumes of 80,000 units, the highest level since first quarter of the 2022 fiscal year, when the semiconductor shortages began. The company expects to be up 15% vs. the third quarter of fiscal year 2022. Liquidity has also remained strong, as the company ended the quarter with £3.9 billion ($4.8 billion) in cash. Nevertheless, the company has extended an untapped £1.5 billion unsecured revolving line of credit from March 2023 to April 2026.
“Jaguar Land Rover has returned to profit as chip shortages eased in the quarter and production and wholesales increased,” said Adrian Mardell, Jaguar Land Rover’s interim chief executive officer. “These improved results are testament to the hard work and dedication of our people across the business who have delivered a further increase in production of our New Range Rover and Range Rover Sport models.”
Where the volume lies
The company says it continues to see strong demand with 215,00 vehicle orders at the end of December 2022, up approximately 10,000 units from the end of its previous quarter. But 74% of the demand was focused on three models: the Range Rover, Range Rover Sport and Defender, with the rest of the lineup accounting for the remaining 26%.
During the quarter, wholesale volumes totaled 79,591 units (excluding the Chery Jaguar Land Rover China joint venture). That’s an increase of 15% from the same quarter last year and 5.7% more than the prior quarter, which ended on Sept. 30, 2022. Demand rose 17% in North America, 13% in the United Kingdom, and 10% in overseas markets. But the automaker did experience declines in China, where sales were down 13% as well as in Europe, where they declined 3% when compared to the previous quarter.
Jaguar Land Rover blamed weak demand in China on lockdowns and dealer closures which caused high rates of staff absence as COVID-19 restrictions were relaxed.
For the fourth quarter of fiscal year 2023, the company’s guidance remains unchanged, with sales of 80,000 or more units as the Jaguar Land Rover expects to achieve breakeven cashflow and a positive EBIT margin for the full year.
Jaguar Land Rover’s parent company, India’s Tata Motors, derives approximately 60% of the group’s operating income comes from Jaguar Land Rover
In the past couple years, most of Jaguar Land Rover’s product strategy has been aimed at the SUV side of the business, with Land Rover seeing its lineup expanded and enriched. In contrast, the Jaguar side of the business has diminished along with consumer demand for cars.
While the company has brought out crossovers such as the E-Pace, F-Pace and battery-electric I-Pace, sales continue to fade. Having sold 39,594 Jaguars in 2017, a mere 9,668 vehicles were sold five years later, according to one online source, a decline of 75%. But the company remains committed to transforming Jaguar into an all-electric vehicle brand, with a three-model lineup debuting with the 2025 model year.
As for Land Rover, the brand intends to maintain its status as the world leader of luxury SUVs with six pure electric models in the works. The first all-electric Land Rover model is slated to arrive in 2024.
“We remain committed to our Reimagine strategy which will transform JLR into an all-electric modern luxury business, whilst delivering our climate goals and striving to exceed our clients’ expectations,” Mardell said.