Tata Motors' profit flat on local sales

Struggling domestic operations resulted in an almost unchanged consolidated net profit of Tata Motors in the quarter ended March, despite a stellar performance by its subsidiary Jaguar Land Rover.

The Mumbai-based company missed estimates by a huge margin, reporting a consolidated net profit of Rs 3,918 crore for the reporting quarter, a drop of 0.68 per cent from Rs 3,945 crore posted in the same quarter last year. Analysts expected the net profit to be in the range of Rs 4,600 crore but due to a larger-than-expected erosion in profits at the stand-alone the level overall performance got severely hit.

The company’s local unit posted its sixth straight quarterly operational loss at Rs 816 crore for the reporting period as sales of passenger and commercial vehicles nosedived. Net loss in the same quarter last year stood at Rs 312 crore.

Higher finance costs (Rs 1,667 crore) due to early buyback of JLR bonds issued by Tata Motors as well as a foreign currency exchange loss (Rs 355 crore) also pulled down the net profit of the company at the consolidated level.

Net sales of the company stood at Rs 64,715 crore, a gain of 16 per cent during the reporting quarter over Rs 55,841 crore posted in the same quarter last year. Its Ebitda (earnings before interest, taxes, depreciation and amortisation) margin for the quarter stood at 16.5 per cent as against 14.9 per cent.

At the stand-alone level the company marked a slide of 33 per cent in volume sold at 132,308 units as compared to 197,056 units sold in the same period last year even as it marked a capacity utilisation as low as 45 per cent at its plants.

Stand-alone net sales stood at Rs 8,438 crore, a drop of 23 per cent for the period against Rs 10,937 crore. The Ebitda margin remained negative at 6.2 per cent for the reporting period as compared to 3.5 per cent.

C Ramakrishnan, chief financial officer, said, “The India business continues to face tough market conditions. Sustained deceleration in economic growth leading to weak consumer sentiment, high inflation, high fuel prices, reduced availability of finance and an elevated interest regime continues to impact the demand for the entire auto industry in general and commercial vehicles in specific.”

The company is banking on two upcoming launches — Zest and Bolt — to bring some relief in the coming months. “Auto sales are expected to show some improvement in the first half of this year, especially with a stable government at the Centre,” Ramakrishnan added.

Jaguar Land Rover again proved to be the saving grace for the company by posting a net profit of £449 million (Rs 4,500 crore) for the reporting quarter, a growth of 19 per cent from £377 million (Rs 3,700 crore) in the same quarter last year.

Robust demand from China, which bought every fourth vehicle manufactured by JLR, retaining the position as its biggest market, pushed its Ebitda margins to 17.2 per cent as against 16.2 per cent.

JLR’s net revenue rose seven per cent to £5.3 billion (Rs 53,500 crore) against £5 billion (Rs 50,000 crore) on increased demand for the Jaguar XJ and XK, Range Rover Sport and Range Rover Evoque models. The company is preparing to launch the new Range Rover Discovery Sport and the new Jaguar XE. In addition, a new family of two-litre engines is expected to start operation soon.