January 30, 2020 / 10:49 AM / 19 days ago

Jaguar-Land Rover parent warns of profit hit from coronavirus outbreak

BENGALURU (Reuters) - The coronavirus outbreak in China could hit profits at luxury car brands Jaguar and Land Rover, parent Tata Motors (TAMO.NS) said on Thursday, the latest company to warn of an impact from the epidemic that has killed 170 people and forced businesses to suspend operations.

FILE PHOTO: A Tata Tigor car is pictured at the assembly line inside the Tata Motors car plant in Sanand, on the outskirts of Ahmedabad, India, August 7, 2018. REUTERS/Amit Dave

It could hamper JLR production in China as the epidemic has raised concerns that thousands of Chinese factory workers on extended Lunar New Year holidays may struggle to get back to work next week due to extensive travel restrictions.

The Indian carmaker said the outbreak could impact its profit margin forecast of around 3% for the JLR unit in fiscal 2020 at a time when it was making progress on a turnaround plan to improve sales in China.

Several companies including Tesla Inc (TSLA.O), Apple (AAPL.O) and Starbucks (SBUX.O) have warned of a possible impact from the outbreak.

“We need to see when people come back and resume work, how soon they can replenish pipeline inventory,” Chief Financial Officer PB Balaji said as the company reported its third-quarter results.

A 24% rise in sales at Jaguar and Land Rover in China in the quarter, however, helped the company beat profit expectations.

Tata Motors said it expects capital spending at JLR to rise to 4 billion pounds ($5.26 billion) in 2021 from 3.6 billion pounds in 2020.

Earlier on Thursday, the company said JLR Chief Executive Officer Ralf Speth will retire from the role in September, but will stay as non-executive chairman.

The carmaker reported net profit of 17.38 billion rupees ($245 million) in the third quarter ended Dec. 31, compared with a loss of 269.93 billion rupees a year earlier, when it booked an impairment charge related to the JLR unit.

Analysts, on average, were expecting a profit of 10.19 billion rupees, according to IBES data from Refinitiv.

Tata Motors last year mapped a revival plan for JLR and decided to cut around 10% of its workforce, following a drop in sales at the unit.

The company’s overall revenue from operations fell 6.8% to 716.76 billion rupees in the quarter as its home market, India, faces an economic slowdown.

Tata Motors, like the rest of the auto industry in India, has been struggling with tighter credit and higher insurance costs, which have bruised demand and caused a pile-up of inventory.

Reporting by Chandini Monnappa in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur

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