Tata Motors Limited
Q4 2021 Earnings Call Transcript

Published: 18 May 2021

[Operator:]

Ladies and gentlemen, good day and welcome to the Tata Motors Q4 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. All questions will be taken up at the end of the session. Please note that this conference is being recorded. I now hand the conference over to Mr. Prakash Pandey from Tata Motors. Thank you. Over to you, sir.

[Prakash Pandey:]

Yes. Thank you. Good evening, everyone. Hope all of you and your family members are healthy and safe during these uncertain and unprecedented times. On behalf of Tata Motors, I warmly welcome you all for our Q4, FY '21 results conference call.

[PB Balaji:]

Thank you. Thanks, Prakash. Firstly, a warm welcome to all of you. Thanks for taking the time. As Prakash said earlier, I hope all of you are safe and sound. I intend to -- the presentation has already been uploaded into the Investor portal. And therefore, I'm presuming all of you had a chance to take a look at it, and also have it in front of you. I’ll refer to the page numbers and move forward with these. Can we have the next slide please of Safe Harbor statement? Moving to the next one. Yes, an intense period of product actions as well as company actions that you saw in Jaguar Land Rover. Defender, of course, we're going to talk a lot about Defender today, winning The World Car Design of the Year. And now almost 12 out of 13 are placed on electrified, and you were there when the Reimagine strategy and the Refocus transformation was announced, and we'll talk about that later as well. We'll be concluding Charge in this quarter. We generated £6 billion of lifetime savings, one of the most successful projects in the automotive world, I'm very happy with that. Next slide, please. In Tata Motors, of course, we did see significant product interventions post-BS IV, and at this point in time, what is really happening is customer current experience the product and really giving us excellent feedback, which has now reflected in our market shares, particularly in M&HCV and ILCV. Tata Safari, the legend was reborn. Of course, it's strong response into the market, and PV has been a standout performer which Shailesh is going to talk about even more. The cost savings target we had indicated 6,000 crores for the year, we ended up at 9,300 crores, so strong performance there as well. The promoters have completed their funding, the ones remaining outstanding warrants have been exercised. Next slide, from a performance perspective for the quarter, a strong all-round performance despite the pandemic, if you look at the full year. Full year EBITDA of almost 30,000 crores, but if I look at closer home into Q4, the EBIT numbers that you see of 7.3% is the highest year-to-year as seen in the last many quarters. We ended the year with a strong cash flow for the quarter as well as for the year being a positive free cash flow.

[Adrian Mardell:]

Many thanks, Balaji. Good afternoon, evening to you all on the call. So same format for us, exactly as Balaji said, first-half was the week half, and we had a strong second-half performance, particularly in Q4. Can everybody hear me? Thank you. The 7.5%, you see that EBIT in Q4 was mostly and overwhelmingly underlying performance. So, really pleased with that. You see the PBT £500 million and the big free cash flow as well, £729 million. Full year results on the right, that you can see dramatic improvement to the previous year, even though FY '20 was impacted partially in quarter four, if you recall. Next slide, please. Okay, so these are the headlines below that we'll get into revenue details later in the presentation. Balaji has talked about the exceptional item, and we'll go through the walks on cash flow as we normally do. Next slide, please. An importantly, I want to make unexceptional is because I don't want to repeat what Balaji said was look, our assessment at the end of the year was very close to the preliminary assessment we made on February the 26, £1.5 billion. And just to remind you, those products MLA made did not fit in to the Reimagine strategy. They would not leapfrog competition and we're all about being the best of the best, not just competing. So, that's why we took the really difficult and emotional decision to cancel those programs. We are still working through the restructuring costs beyond the headcount 2,000 people, and that's mostly about getting the right positions and the right people into the organization with the right skill sets. That's management grades, now more people with specialist skills, which is fundamental to success in this environment. Next slide, please. A busy one, but we wanted to show you several flavors of the retail data. If we look at the chart, full year below, look, you can see the highlights and study it in your own time. But, a dramatic quarter-over-quarter improvement on China, in part because Q4 FY '20 of course COVID hit China first, and therefore was impacted negatively. But nice year-over-year performance in North America as well, particularly in Q4. The other regions are starting to build back. There were limited impacts of course, last year. They are starting now to build back with a huge order demand we have at this point in time, with almost 100,000 customers waiting to drive our vehicles. So very, very healthy order bank going into quarter one.

[PB Balaji:]

Thanks Adrian. Next slide, please. Talking about Tata Motors' standalone numbers, you have already seen. A call out I would make here is the spread between EBITDA and EBIT starting to narrow as the revenue start picking up. But on an overall year, despite the pandemic we grew 2% with revenues up 7% and EBITDA margin improving by almost 380 bps over last year, so that's a good place to be. The profit before tax before exceptional items that is of course we talked about the PV impairment reversal in the exceptional item, but the fact that this quarter was for breakeven PBT. Full year of course, impacted by the first quarter and the second quarter that we saw. Free cash flow, of course, strong for year, for the third quarter in a row. And full year also ended on a positive basis as we had guided earlier. Next slide, please. Same highlights, maybe I'll just pick up one or two items here. I think the question on CV, if I look at the recovery starting to move from M&HCV and ILCV, so it's not those things are starting to fire well. With higher demand from infra, we're also seeing percentage of M&HCV in our overall portfolio also starting to increase. PV of course, this is the highest sales that we saw in the last 34-quarters doing extremely well. EV growing at 215%, so that's a whopping growth that we're seeing on the EV side. EBITDA is the highest in the last eight quarters. And the CV EBITDA within touching distance is a double digit that we talked about in the guidance. And PV EBITDA at 4.9% is well ahead of the breakeven that we indicated, and absolute EBITDA highest in the last 10-years. So overall, domestic business come through well across all the lines. Next slide, please. To call out here, I think every line item with volume mix realization starting to grow well. The one that's really a fly in the ointment here is variable cost coming from inflation on commodities that we have seen. That is of course going to be an issue as we go into Q1 as well, that's coupled with lockdowns. We'll talk a little bit towards the end on that front. Our fixed costs control continues to be tight, and that's the reason we see a benefit coming as volumes picking up. Overall PBT margin at 3% for the quarter is something that we are quite satisfied with, given the conditions. Next slide. Similar to JLR, if you watch the central box where I think cash profit after tax well ahead of investments, and even on a full year basis. So, the decision to actually cut back on investments proven right, and at the same time, we're not being pedantic about it, we did dial up the investments, particularly in PV as we started seeing growth come through. As far as the working capital changes are concerned, most of it from a day's perspective, we are reducing our inventory days. We are reducing our better days, and we are reducing our creditor days. So, a combination of that despite that we're starting to see working capital negative continue, and the growth is coming through, you're seeing this number really stew cash. And hygiene point here, as Q1 with the kind of lockdowns that we're seeing, this will unravel for a while until growth comes back again. So that's just the nature of the game that we are currently on to. Next slide. Investments, you've already seen. I don't want to spend more time on this other than to say that we are managing our investment quite prudently in current conditions focused on products and technologies. Next one. This is a 6,000 crore target that we've given ourselves to deliver and against that we have delivered 9,300 crore. You will notice on the investment line we did not meet the target, because we diverted that money for unlocking growth which is what you're seeing on the PV side, and on the working capital side of course, good number there. Overall market share -- fine, fine. Don't change, go back. Overall, market shares have been sequentially improving as the year progressed. We did end the quarter at almost 47% share which on a likely basis lands up at 42.4%. Draw your attention to the M&HCV market share improvement over the last four years. So we've been consistently increasing that share and almost 400 bps added over the last few years. ILCV also continues to increase its market share momentum as it will forward. Real call out will be on small commercial vehicles, where I think they have a task on hand. We did end the quarter strong in terms of pick up in numbers, sequentially it isn't improving, but clearly that is a number that is not acceptable to us and we need to ensure that we work on that and deliver against it. But since I wouldn't speak too much about whether salience was completely required, so very little to talk about. Just overall number actually has got impacted by the small commercial vehicles salience disproportionately increasing the first-half of the year. And therefore that is what you're seeing as number. No excuses, it is just the nature of the game. And therefore we need to do a better job of picking up the salience from commercial vehicle share, which we are committed to. Next slide. Financials, commercial vehicles, clearly the revenue numbers going at 90% for the quarter, even on a sequential basis, the numbers starting to increase, which is good news. EBITDA at 9.1%, we talked about and the gap between EBITDA and EBIT starting to narrow funds. Overall, on a full year basis, EBIT was breakeven, despite the mayhem that was there in the first-half of the year, as we've seen those numbers there. Let me hand it over to Girish in terms of how we see the current quarter and what has happened in the last quarter. Girish, over to you. Next slide, please.

[Girish Wagh:]

Yes. Thanks, Balaji. So