Tata Motors Ltd, India’s biggest automotive company, on Thursday posted a consolidated net profit of Rs 2,244 crore in the quarter ended June, missing Street estimates as domestic business pulled down the company’s overall performance.
A slump in demand for medium and heavy commercial vehicles (MHCVs) such as trucks, coupled with intense competition from car makers in the domestic market, resulted in net profit being halved at the stand-alone level. Analysts tracking the company expected the net profit to be in the region of Rs 2,600-2,700 crore.
Tata Motors’ consolidated net profit grew 12.25 per cent during the quarter, compared to Rs 1,999 crore posted in the corresponding quarter a year earlier.
Jaguar Land Rover (JLR), Tata’s British unit that makes luxury cars Jaguar and Land Rover, continued to be the profit-driver for the company as it posted a margin improvement to 14.4 per cent from 13.4 per cent. However, an exceptional loss on account of revaluation of foreign currency loans amounting to Rs 440 crore impacted the net profit.
“Volumes, net revenue and profitability, impacted by weak macro economic factors, subdued outlook and competitive pressures in passenger vehicles business. The MHCV (medium and heavy commercial vehicle) industry witnessed a decline in demand due to weak macro-economic performance, weak outlook, low freight availability and excise duty increases in March 2012,” stated the company.
Standalone net profit stood at Rs 205 crore, a fall of 49 per cent, for the quarter, compared to Rs 401 crore posted in the corresponding quarter last year.
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Consolidated turnover of the company stood at Rs 44,176 crore for the quarter against Rs 34,060 crore, a growth of 30 per cent. However, at the stand-alone level, the company’s revenue declined eight per cent to 11,581 crore, compared to 12,586 crore posted in the comparing quarter last year.
The company, though, expects revival in domestic operations in the coming quarters.
“Every four-five years we do see a volume decline in MHCVs and it comes back up rapidly,” said Ravi Pisharody, executive director-commercial vehicles, Tata Motors.
Further, JLR sales in China surpassed all other markets including the UK, North America and the Europe. China accounted for 22 per cent of total sales of JLR, a growth of 91 per cent in volumes led by demand for the Land Rover range.
JLR sales grew 34 per cent to 83,452 units during the quarter against 62,090 units. Tata Motors sales declined 3.4 per cent to 190,483 units against 197,606 units.
The company was forced to shut production twice at two of its plants in India in the last three weeks. This was done to rationalise production and align with demand.
C R Ramakrishnan, chief financial officer, Tata Motors, said: “We have to monitor the situation on the inventory side carefully. We would not allow the inventory to go beyond a certain point. We will have to shut production if required again to bring production more in line with demand”.
The company also said competitive intensity posed significant challenge to the passenger vehicle industry, with higher inflation, interest costs, fuel price increases dampening the demand.