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A strong showing by Jaguar Land Rover (JLR) continues to drive the growth in revenue and profits of Tata Motors.
India’s largest automobile maker beat analysts’ estimates to post its first quarterly profit gain in four quarters. Consolidated revenue grew 31 per cent to Rs 56,882 crore, compared to the corresponding quarter last year. Profit after tax grew 71 per cent to Rs 3,542 crore during the quarter ended September 30, as new models from Jaguar and Land Rover brought incremental volumes.
The net profit would have been higher but for Rs 273 crore of exceptional items relating to foreign exchange and provisioning for costs associated with closure of some operations for the quarter, versus Rs 10 crore in the year-ago period. The consolidated numbers have been driven by JLR, as its domestic business continues to report losses.
On an average, analysts tracking the company were expecting consolidated net profit at Rs 3,100 crore — the best estimate was Rs 3,450 crore. The company had reported net profit of Rs 2,074 crore for the corresponding quarter last year. On revenue, the average of analysts’ estimate was Rs 54,800 crore.
On a standalone basis, the company reported a loss of Rs 803 crore for the quarter, the fourth straight one where it has reported a loss. Demand for trucks and cars continue to be subdued, taking a toll on profitability of the domestic business. Tata Motors had got a dividend from JLR in the June quarter, which had helped it report a net profit (Rs 703 crore) in standalone business.
Resilient Chinese demand for the Jaguar XF, XJ, Range Rover Evoque, Range Rover Sport and Range Rover from the UK and Europe led the growth during the quarter. China now accounts for a little more than a fourth of JLR sales. JLR reported a rise of 66.2 per cent in net profit at £507 million for the reporting quarter, as against £305 million in the corresponding quarter last year, while revenues were up 40.3 per cent to £ 4,612 million. A pound is Rs 100.50, on Friday's prices. Operating profit margins also improved to 17.8 per cent as against 14.8 per cent in the year-ago quarter, as Ebitda (earnings before interest, taxes, depreciation and amortisation) jumped 69.3 per cent year-on-year to £823 million.
Thanks to strong JLR performance, consolidated Ebitda jumped 58.2 per cent over a year to Rs 9,273 crore for the quarter. Consolidated operating profit margins improved to 16.3 per cent from 13.5 per cent in the year-ago quarter. “The weak operating environment in the India business was more than offset by the increase in wholesale volumes and richer product and market mix at Jaguar Land Rover,” the company stated.
Sales of its commercial and passenger vehicles at home (including exports) declined 32.5 per cent to 150,930 units, compared to the corresponding quarter in the previous year. The fall in volumes impacted standalone revenues, too, which fell 29 per cent year-on-year to Rs 8,868 crore. The stand-alone operating profit margins, however, dipped to a more than four- year low, to only two per cent compared to 5.9 per cent in the same quarter last year.
C Ramakrishnan, chief financial officer of Tata Motors, said: “Economic growth is expected to remain subdued, so commercial vehicle (CV) sales will also remain under pressure. Competition will bring further pressure on margins. Low levels of transport freight and infrastructure activity, tight financing environment, frequent diesel price increases, low vehicle resale prices and consequent deferment of new purchases continues to impact demand for the entire CV industry.” He also said banks tightened lending norms, especially to CV buyers, due to rising levels of non-performing assets. The company further said around 40 per cent of the fleet was unutilised with owners.
Arun Agarwal, auto analyst, Kotak Securities, said: “The standalone business is expected to remain under pressure. We expect JLR's profitability to stay healthy, led by new launches and mix improvement.”
The shares of Tata Motors, up almost 11 per cent in a month and 38 per cent in the past three months, closed at Rs 385 on Friday, reflecting a gain of 1.3 per cent, compared to its previous close. The results were announced after market hours. At 9 pm India time, Tata Motors’ ADR Equity on the US-based Nasdaq exchange was trading higher by 2.2 per cent, at $30.33.
The company also said a new hatchback and a new compact sedan under the Tata brand were in the pipeline. With net debt of Rs 19,000 crore and cash in hand of Rs 2,000 crore, the company will reduce debt by Rs 1,000 crore by March 2014.
It might also restructure the holding of its foreign subsidiaries, to put these under one holding company. “We are also undertaking some efforts in lightening the balance sheet,” added Ramakrishnan.
