Mumbai: Foreign exchange charges and slowing vehicle sales took a toll on Tata Motors Ltd, India’s largest automaker, as it reported a net loss of Rs263 crore in the December quarter, marking its worst performance in seven years, compared with nearly Rs500 crore profits a year ago.
Tata Motors, which accounts for at least half the commercial vehicles sold in the country, posted a one-third drop in revenues (net of excise payments to the government) to Rs4,713.63 crore in the quarter gone by from nearly Rs7,206 crore in the year-ago period.
The losses, falling short of analyst forecasts by a wide margin, were tempered by a tax reversal of Rs155.89 crore in the quarter. The outgo in the same quarter of fiscal 2008 was Rs166.05 crore.
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Forex losses, most of which are notional since they represent the value of the company’s foreign currency hedge contracts in the quarter, were pegged at Rs226.52 crore.
“We had the worst Q3 and I do not expect to see this in my lifetime,” managing director Ravi Kant told reporters here, adding the company expected to launch the Jaguar and Land Rover vehicle models this calendar year as planned. The firm spent $2.3 billion acquiring the brands and facilities from Ford Motor Co. last year.
A poll on Thursday of eight analysts by Mint forecast quarterly net profit of Rs50.95 crore. The gloomiest predictions came from IIFL Capital, a subsidiary of brokerage India Infoline Ltd, which predicted a net loss of Rs293 crore.
With commercial vehicle sales falling under tight liquidity and falling demand for transport services as industrial production decelerated, Tata Motors, the country’s largest maker of trucks and buses, bore the brunt in the three months ended 31 December.
Sales volumes of such vehicles fell 40% to 49,546 in the period from 82,568 in the same quarter of last fiscal year. Its car and utility vehicle sales fared better, falling 14.4% to 42,187 from a year ago.
As sales lagged and commodity prices began easing, the firm spent less on raw material costs in the quarter gone by, at Rs2,972.09 crore versus Rs4,789.50 crore. Depreciation expenses climbed to Rs201.65 crore from Rs167.51 crore.
Grim outlook: The truck production line at Tata’s Jamshedpur plant. The company reports a net loss of Rs263 crore in the December quarter.
Shares of Tata Motors closed the day down 1.6% to Rs149.65 on the Bombay Stock Exchange, whose benchmark Sensex index expanded 1.9%.
Friday’s numbers indicate that Tata Motors will almost surely report a lower profit this fiscal and perhaps in sales, too. Its nine-month net profits stand at Rs409.84 crore—just 27% of last year’s Rs1,492.65 crore in the first three quarters of fiscal 2008.
Still, Ravi Kant said he expected a better performance in the fourth quarter as volumes pick up and margins improve. The company, which has gained due to falling commodity and oil prices, will trim expenses by up to Rs1,500 crore in the next two years. “The fourth quarter will see a greater impact (of costs cuts) than the previous three quarters put together,” he said.
Tata Motors also plans to cut back a proposed Rs2,000-3,000 crore investment in capacity expansion in the next two-three years by Rs700-800 crore. There has already been plant closures at its commercial vehicle factories in Pune, Jamshedpur and Lucknow.
Jairam Nath, an auto analyst at Kotak Institutional Equities, said: “We expect the company to end the current quarter with 105,000 to 110,000 units (including cars and commercial vehicles). The benefits of the softening of commodity prices will also kick in.”
Tata Motors’ decline in commercial vehicles sales volumes has been better than its peers in the quarter gone by. Sales at Ashok Leyland Ltd, the country’s second-largest commercial vehicle maker, dropped 58% to 8,011 units from 18,965 units in the year-ago quarter. Net profit at the Chennai-based company slumped 84% to Rs18.80 crore for December quarter, against Rs120.20 crore in the same period the year earlier. Revenue was Rs1,000.80 crore, compared with Rs1,800 crore.
Farm equipment and utility vehicle maker Mahindra and Mahindra Ltd reports its quarterly earnings on Saturday.
Bloomberg contributed to this story