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The consolidated net profit of the Mumbai-based company plunged 52 per cent to Rs 1,627 crore for the quarter ended December 2012, a huge fall considering that the figure was Rs 3,405 crore during the corresponding quarter in FY12. This is the lowest net profit for the company in three years.
The bleak results come at a time when the company’s biggest revenue generator, Jaguar Land Rover, too, struggle with rising expenses.
Tata Motors’ standalone performance recorded its first net loss in four years at Rs 458 crore for the quarter under review, compared with a net profit of Rs 173 crore recorded in the year-ago period.
The company’s net profit for the third quarter of FY13 was much below analysts’ expectations of around Rs 2,800 crore. Its stock on the Bombay Stock Exchange reacted negatively to the results, ending at Rs 296.7 on Thursday, down 2.59 per cent from the previous day’s close.
Consolidated margins came down to 13.3 per cent for the quarter, compared to 16 per cent reported in the same quarter in FY12. A price hike of around one per cent undertaken during the quarter on commercial vehicles did not offset costs completely.
Income from operations at the consolidated level for the quarter stood at Rs 46,089 crore, a rise of 1.83 per cent when compared to last year’s Rs 45,260 crore.
C Ramakrishnan, chief financial officer of Tata Motors, said: “Demand continues to remain under pressure mainly for the medium and heavy commercial vehicle segment. Sluggish economic activity and weak macro outlook have impacted freight availability. This, combined with high operating costs for transport operators, have resulted in decline in MHCV (medium and heavy commercial vehicle) sales. We expect marketing costs to increase in the coming period to counter rising competition."
The company’s passenger vehicle (PV) sales slumped by 36 per cent, while exports dipped by 18 per cent. While buyers continued to flock to competitors’ products in the PV segment, factors such as high lending rates and fuel costs, among others, impacted sales of heavy duty trucks. Tata Motors has the biggest share of 62 per cent in the commercial vehicle segment, while its PV share has slipped to 10 per cent from the earlier average of 14 per cent.
Jaguar Land Rover, which contributes over 90 per cent of the net profit for the company, saw a decline of 25 per cent in net profit at Pound 296 million (about Rs 2,456 crore) for the quarter, compared to Pound 393 million (about Rs 3,261 crore) posted in the corresponding quarter a year ago.
The fall was due to unfavourable product mix, steeper marketing costs, negative currency movements, new launch costs and rise in new product investments and related costs. JLR’s margin for the quarter under review dipped to 14 per cent from 17 per cent posted during the year-ago period.
Although it would not be possible to scale up the margins from here, the challenge now is to maintain it at the current levels in the coming quarters, said Kenneth Gregor, chief financial officer, JLR.
Tata Motors has raised its capital expenditure in JLR to Pound 2.75 billion (about Rs 22,825 crore) for the next financial year, compared with its usual Pound 2 billion (Rs 16,600 crore).
Despite the negative demand outlook, Tata Motors will go ahead with its planned spending of Rs 2,500-3,000 crore on new product development and capital expenditure. On the commercial vehicle front, it is on course to launch several variants and new models ranging from micro trucks to heavy duty trucks and buses in the coming months to improve sales.
Net profit misses estimates on JLR
Tata Motors posted profit that missed estimates as costs rose and increased demand for its lower-priced Evoque model cut earnings at the JLR unit. The latter said its model attracting more buyers may’ve stalled profit growth. (Bloomberg)
