JLR powers Tata Motors March quarter earnings

Consolidated net profit rose to Rs5,177 crore during the quarter, up 201% from Rs1,716.5 crore a year ago; net sales rose 18.76% to Rs79,926.12 crore from a year ago


Profit at the Jaguar Land Rover luxury-vehicle unit increased to £472 million from £302 million. Photo: Bloomberg
Profit at the Jaguar Land Rover luxury-vehicle unit increased to £472 million from £302 million. Photo: Bloomberg

Mumbai: India’s largest automaker Tata Motors Ltd’s revenue and profit for the three months ended 31 March beat analyst expectations handsomely, on the strength of the performance of the company’s Jaguar Land Rover (JLR) unit.

Consolidated net profit rose to Rs.5,177 crore during the quarter , up 201% from Rs.1,716.5 crore a year ago. Net sales rose 18.76% to Rs.79,926.12 crore from a year ago. The profit was the highest in seven quarters.

A Bloomberg poll of brokerages had estimated a net profit of Rs.3,521 crore and net sales of Rs.73,473.90 crore.

At a standalone level, the company posted a net profit of Rs.464.99 crore, an improvement over the Rs.1,164.25 crore net loss a year ago. Net sales rose 16.7% to Rs.12,459.51 crore from Rs.10,676.19 crore.

While growing sales across India, especially of medium- and heavy-duty trucks, helped, the performance was largely driven by the JLR unit.

The profits included a one-time gain of Rs.555 crore on account of an insurance claim.

But the firm also included an adjustment made against a potential recall of Jaguar XF models in the US. JLR is likely to recall 100,000 units of the model to fix airbags supplied by Takata. The company has just begun the process, said Ralf Speth, chief executive officer (CEO) at JLR.

Net profit at JLR rose 56.29% to €472 million, while net sales increased 13.18% to €6,594 million.

During the period, JLR sold a total of 158,213 units, up 28% over the year-ago period. For the full year that ended in March, the maker of Discovery Sport and Jaguar XE models retailed 521,571 units, up 13% over a year ago.

March was a good month for JLR with sales rising 29% across its markets, from 28% in the UK to 23% in North America to 19% in China and 54% in Europe.

“Overall (it is) a stellar performance of JLR despite a weakening product mix,” said Nitesh Sharma, analyst at PhillipCapital.

“The China sales are coming back,” said Speth, but added that the company remains cautiously optimistic in its outlook.

Meanwhile, after incurring losses for several quarters, the domestic operations of the company turned in a profit on the back of higher demand for medium- and heavy-duty trucks. Sales of such vehicles rose 26% in the quarter over a year ago.

Guenter Butschek, managing director and CEO at Tata Motors, said the newly launched Tiago has exceeded the company’s expectations and the Sanand plant where the model is made will soon start a second shift to boost production.

“The Tiago has got Tata Motors back on the shopping list of its customers,” he said.

The turnaround in domestic business took analysts by surprise. “There is a big turnaround in the standalone entity,” said Mahantesh Sabarad, deputy head of research at SBICap Securities Ltd.

Sabarad expects the consolidated revenue to be higher starting 2017-18. By then, he reasons, all the capital expenditure in JLR will be done. The result will be higher cash flow and revenue, although profitability may be “diluted” by the growing contribution of cheaper models.

“JLR is moving from being a premium, high-margin company to a high-volume, low-margin firm,” he said.

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