Sales, exports fall, but so do costs
Tata Motors, the country’s largest truck producer, today posted an increase of 57 per cent in net profit, thanks to an altered accounting policy and tight cost measures adopted in the first quarter.
The company, which revealed its standalone results today, reported a net profit of Rs 513.8 crore for the quarter ended June 30 against Rs 326.1 crore in the corresponding quarter a year earlier.
In the revised accounting policy introduced in the last quarter of the previous financial year, the company posted only Rs 5.54 crore as a notional exchange loss as against a loss of Rs 161.59 crore in the same period last year.
Further, reduced spending on raw materials, thanks to softened prices, helped the company reduce total spending by more than 10 per cent, at Rs 5,917 crore as compared to Rs 6,625 crore.
The rise in net profit was on the back of a fall of 11.8 per cent in sales, which was Rs 6,876.6 crore as compared to Rs 7,796.3 crore in the corresponding quarter a year ago. The absolute dip in sales was 4.3 per cent, at 127,340 units as against 133,079 units in the two comparable quarters.
Increased production activity at the company’s tax-free unit at Uttarakhand also helped reduce excise duty payout during the quarter, which stood at Rs 526 crore as against Rs 909 crore, a fall of 42 per cent.
Ravi Kant, non-executive vice-chairman, said: “Sustaining such high margins in the upcoming quarters will be difficult but we will try to come close to it. We have today reported the highest Ebitda (earnings before interest, taxes, depreciation and amortisation) margin in the history of the company. Our focus will be to continue with the impressive performance.”
The company reiterated today that the focus in the remaining quarters will be to deleverage its business and raise maximum capital. Tata Motors has so far repaid $150 million of the $1 billion it had rolled over recently, which was used in payout of the Jaguar Land Rover loan.
“We are looking at various factors to raise capital, which includes selling stakes in companies, listing of subsidiaries and issue of global depository receipts (GDR’s). But we can’t provide any timeline, we will announce the measures at an appropriate time”, said C Ramakrishnan, chief financial officer.
On securing a much-sought guarantee from the British government for a loan to JLR of £340 million, the company said there had been no headway. “The discussions are still going on and I cannot comment further on it,” replied Kant.
The company had secured the loan but it will be released only if the government guarantees it, says the European Investment Bank, in case the two brands go bust.
The company has appointed two consultancy companies – KPMG and Roland Berger Strategy Consultants to contain costs at JLR.
It will go ahead with the launch of the new Indigo and Crossover – its two new model offerings-in the second half of the current year. In addition, retail sales of the World Truck and variants of the Ace will also be done this year, said senior officials.
Due to continued economic depression in international markets, exports remained under pressure for the quarter. Exports to markets like Russia, the Middle East, South Africa and Sri Lanka marked a decline.
Exports reported a fall of 43 per cent, at 5,220 units as against 9,220 units. However, senior officials have predicted a rebound in the current quarter itself.
On outlook for the year, the company stated that liquidity has improved, while raw material prices have stabilised. “Government stimulus packages and the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) have helped the heavy commercial vehicle segment recover, albeit slowly,” said an official.
