BackTata Motors posts 12.25% rise in profit on JLR’s performance
Profit rises to `2,245 crore , while net sales rise 30% to `43,171 crore
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Mumbai: Tata Motors Ltd posted a 12.25% increase in net profit in the June quarter as the performance of UK subsidiary Jaguar Land Rover (JLR) offset a slump in domestic operations, the company said in a BSE filing on Thursday.
Profit rose to ₹ 2,245 crore from ₹ 2,000 crore in the year earlier. Net sales rose 30% to ₹ 43,171 crore from ₹ 33,108.12 crore. The earnings were in line with estimates.
Had it not been for a foreign exchange loss of ₹ 441 crore, including the revaluation of foreign currency borrowings, deposits and loans arising from the depreciation of the rupee, consolidated profit would have been higher, the company said.
For the first time since it bought Jaguar Land Rover in June 2008 from Ford Motor Co. for $2.3 billion (around ₹ 12,696 crore today). Tata Motors declared a dividend of £150 million.
The JLR unit’s profit rose to £236 million from £220 million, while sales rose to about £3.64 billion from £2.7 billion.
JLR said in an analyst presentation after the result announcement that it had repaid “£157 million of preference shares to Tata Motors in the quarter". The UK-based subsidiary, which has emerged as the star performer for Tata Motors, will also “increase investment" in its Castle Bromwich plant and create 1,100 jobs in the UK, it said in the presentation.
On the back of strong volume growth, which has been aided by models such as the Evoqueand favourable commodity prices, JLR margins will continue to be strong in the quarters ahead, said Mahantesh Sabarad, senior vice-president (equity) at Fortune Equity Brokers Pvt. Ltd. The UK subsidiary reported an operating margin of 14.5% compared with 13.4% in the same period last year. It sold 83,452 vehicles during the quarter, 34.4% more than in the previous year.
Margins were helped by an improved geographic mix, with China accounting for 22% of total sales to make it JLR’s largest wholesale (sales to the dealers) market during the quarter.
“Sales of Evoque and demand from China triggered volume growth," said C. Ramakrishnan, chief financial officer, Tata Motors. He was cautious about the outlook.
“We do see some margin pressure going forward as variable marketing expenses, which have remained very low, are likely to go up," he said on an earnings call with analysts.
With the Chinese economy cooling, rival luxury car firms have been offering discounts leading to pricing pressure. JLR has been unaffected by this, Ramakrishnan said.
Earnings at Tata Motor’s India operations were singed by flat truck and lower car sales. Stand-alone net profit (excluding the subsidiary) almost halved to ₹ 205.34 crore from ₹ 401.28 crore a year ago, with net sales dropping to ₹ 10,510.64 crore from ₹ 11,559.45 crore.
“Weak macroeconomic parameters, excise duty increases and poor availability of freight resulted in pressure on volumes in medium and heavy duty trucks. Further, competitive pressures on pricing in certain commercial and passenger vehicle segments and lower volume, impacted operating margins," the company said. Operating margins have narrowed to 7.3% from 8.8% a year ago.
During the quarter, Tata Motors’ car and truck sales, including exports, fell to 190,483 units from 197,265 units a year ago. “If the monsoon recovers, and infrastructure projects start picking up, we may see some improvement in volumes," he said.
Tata Motors dropped 0.87% to ₹ 239.35 at the close on Thursday on BSE. The benchmark Sensex was little changed at 17,560.87 points.
Bhuma Shrivastava contributed to this story.
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