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Tata Motors turns to profit on cost cuts at Jaguar Land Rover

Tata Motors turns to profit on cost cuts at Jaguar Land Rover
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First Published: Fri, Nov 27 2009. 10 06 PM IST

Improving sales: A file photo of a Land Rover SUV at a JLR showroom in Mumbai. Tata Motors second quarter net profit stood at Rs22 crore. Adeel Halim / Bloomberg
Improving sales: A file photo of a Land Rover SUV at a JLR showroom in Mumbai. Tata Motors second quarter net profit stood at Rs22 crore. Adeel Halim / Bloomberg
Updated: Fri, Nov 27 2009. 10 06 PM IST
Mumbai: Tata Motors Ltd, the Indian truck maker that owns Jaguar-Land Rover (JLR), turned to a profit in the second quarter after it cut costs at the luxury car unit and earned returns from investments in group companies.
The consolidated net income in the quarter ended 30 September was Rs22 crore, compared with a net loss of Rs94,200 crore a year earlier, the Mumbai-based company said in a statement on Friday. Sales fell 8.5% to Rs20,890 crore.
Chairman Ratan Tata, 71, has hired two companies to help cut costs at the UK-based unit after the global financial meltdown reduced demand for luxury products. JLR, which cut 2,200 jobs over a year, said in September it may close one of two factories in England’s West Midlands.
“The worst is certainly over for Tata Motors,” said Jatin Chawla, a Mumbai-based analyst at India Infoline Ltd. “The environment has stabilized for Jaguar-Land Rover and the cost-cutting measures have also helped.”
Improving sales: A file photo of a Land Rover SUV at a JLR showroom in Mumbai. Tata Motors second quarter net profit stood at Rs22 crore. Adeel Halim / Bloomberg
Tata Motors sold 44,300 units of Jaguar cars and Land Rover sport utility vehicles (SUV) in the July-September quarter compared with 35,900 in the April-June period, C. Ramakrishnan, chief financial officer, said in Mumbai. The unit narrowed its net loss in the second quarter to £60 million (around Rs460 crore) from £240 million a year ago, he said.
The company earned a profit of Rs1,969 crore from investments in associate companies, compared with a loss Rs771 crore a year ago, it said in a statement.
Tata Motors fell 0.7% to Rs629.25 in Mumbai trading on Friday. The stock has almost quadrupled so far this year and is the best performer in the benchmark 30-stock Sensex index of the Bombay Stock Exchange.
“Some markets have witnessed stability while there are early signs of a recovery in others,” Ramakrishnan said. “There is a strong rebound in the UK and sales in Russia and China are also up.”
Tata Motors expects the benefits of the cost reduction measures to continue in the coming quarters, said Ravi Kant, vice-chairman. The company hired KPMG International and Roland Berger Strategy Consultants to help cut costs at the UK-based division.
Introduction of models such as the upgraded Range Rover and Range Rover Sport that have higher margins also helped the company make profit in the quarter. Tata Motors aims to sell as many as 25,000 Jaguar XJ cars a year starting next quarter, according to Ian Callum, Jaguar’s design director.
Chairman Tata said on 16 November he expects JLR to turn around after a difficult time. India Infoline’s Chawla said the auto maker is expected to break even in the fiscal year ending 31 March, 2012.
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First Published: Fri, Nov 27 2009. 10 06 PM IST