Jaguar Land Rover, the Tata Motors-owned British luxury carmaker, has warned investors that its third-quarter margins are expected to be lower than the previous quarters on account of unfavourable exchange rates.
The company expects its capital spending for fiscal 2014 to increase to 2.75 billion pounds compared with the planned 2 billion pounds.
The announcement came late evening on Bombay Stock Exchange on Wednesday.
Company’s operating margins for the quarter ended September 30, 2012, were 14.8%.
Analysts expected the company’s margins to improve around 15-15.5% during Q3.
The company held an analyst concall on Thursday to discuss Q3 performance ahead of the results to be announced in February.
An analyst from a domestic brokerage said, “What we could sense from the discussion is that the margins in Q3 could drop by 160 basis points. The company is, however, expecting the margins to be back on track in the fourth quarter of fiscal 2013.”
Analysts Sandeep Pandya and Sumeet Jain of Goldman Sachs wrote in a note, “Third-quarter guidance is about 18% below our estimates, which we think could be due to adverse forex and mix shift, lower sales, and discounting on the most profitable Range Rover (due to model transition).”
Higher sales of low-priced Evoque is also expected to be one of the reasons for low margins in Q3.
The company expects capital spending in fiscal 2014 to be 2.75 billion pounds as it plans to accelerate capital spending to develop new products and technologies to meet customer and regulatory requirements.
Owing to the increase in capex, the company has warned that it sees the likelihood of negative free cash flow in the next fiscal.
The company targets funding most of the capex through operating cash flow.