Tata Motors Q3 profit up nearly 11 times as India business surges
MUMBAI:TATA Motors Ltd reported a near 11-fold rise in fiscal thirdquarter profit as a surprise turnaround in its India business helped offset a slowdown in its Jaguar Land Rover (JLR) unit. Earnings still missed analysts’ estimates.
Net profit, including those of its units, rose to ₹1,214.6 crore for the three months ended December from ₹111.57 crore in the same period a year earlier, the biggest jump in seven quarters. A Bloomberg poll of 19 analysts had pegged quarterly profit at ₹2,349.1 crore.
The key reason for the lowerthan-expected profit was a weak performance by JLR.
Sales in that unit rose just 3.45% from a year ago to 154,447 units. While sales in the US and Europe declined, sales growth in China slowed to 14.6%.
JLR’S sales were weighed by few launches and model refreshes during the year, the unit’s chief executive officer Ralf Speth said in an investor call. He also cited cyclicality in sales in the US, and uncertainty over policy treatment of diesel vehicles in Europe and Brexit, as other factors.
The Uk-based unit, however, expects to maintain an Ebitda margin of 8-10% in the medium term, said Speth.
He also forecast stronger performance in the fourth quarter owing to new models.
Ebitda—or earnings before interest, tax, depreciation and amortisation—is a measure of operating profitability.
In the December quarter, JLR’S Ebitda margin narrowed 1.3 percentage points from a year earlier to 10.9%. The unit’s revenue rose 4.3% to £6.3 billion (about ₹56,900 crore).
“JLR’S performance was below our estimates, though it is not worrying because doubledigit margins have been maintained under difficult conditions. The fourth quarter will be better in terms of profitability on the back of increased deliveries of the Velar and refreshed Discovery,” said Jigar Shah, chief executive and head (research) at Maybank Kim Eng Securities India.
The Uk-based unit’s performance was compensated by an unexpected return to profitability in the domestic business.
Tata Motors’ India operations reported a 58.6% jump in revenue to ₹16,102 crore, albeit off a low base. The business swung to a profit of ₹184 crore in the quarter ended December from a loss of ₹1,046 crore in the same quarter the previous year.
Ebitda margin widened 7.5 percentage points to 9% owing to an increase in net realisations from higher sales of heavy and medium commercial vehicles.
“The turnaround strategy is delivering results, in addition to filling product gaps and stepping up market presence,” said Tata Motors chief executive and managing director Guenter Butschek. The firm started cutting costs aggressively in 2016 as part of its turnaround strategy.
Domestic sales rose 34.9% year-on-year to 155,977 units in the quarter. Commercial vehicles led sales growth, with sales of medium and heavy commercial vehicles rising 54% to 40,070 units on increased demand for higher tonnage trucks, pre-buying ahead of the ventilation norms that kicked in from January 1 and the centre’s infrastructure push, the firm said in a statement.