Tata Motors Q1 profit up 41% on pension benefits
SCORECARD Company beats analyst estimates on back of onetime gain
MUMBAI: Tata Motors Ltd reported a 41% increase in fiscal first quarter profit because of a one-time gain from changes made to a pension plan at its UK unit Jaguar-Land Rover.
The company would have swung to a loss of ₹409 crore if not for the one-time gain.
Net profit rose to ₹3,200 crore in the three months ended 30 June from ₹2,260 crore a year earlier. Net sales dropped 10% to ₹58,651 crore from ₹65,115 crore on muted sales at its Jaguar Land Rover unit, a drop in sales of heavy trucks in India and adverse foreign exchange movements.
A Bloomberg analyst poll had estimated June quarter profit of ₹1,479.60 crore on sales of ₹59,788.60 crore.
Sales at the company’s UK subsidiary advanced by a mere 3.5% to 137,463 units in the June quarter from a year ago. Lower than expected sales coupled with higher marketing expenses, particularly in the US, singed earnings before interest, tax depreciation and amortisation (Ebitda) margin, narrowing it to 7.9% from 12.6% in the year earlier.
JLR’s revenue during the quarter rose to £5.6 billion from £5.36 billion a year ago.
The one-time gain on account of pension benefits was offset by the seasonally slower June quarter sales following a strong March quarter and continuation of launch and growth costs, Tata Motors said in a statement.
While JLR’s China and US sales expanded 30% and 16%, respectively, sales in Europe remained flat. It dropped by 1% in the UK due to “the timing impact of vehicle excise duty introduced in April,” the company said in the statement.
“The numbers are disappointing,” said Nitesh Sharma, an analyst at Phillip Capital India (Pvt.) Ltd, adding that margins have lagged estimates by a wide margin. He had expected it to be 11.5%. He attributed it to increasing competitive intensity, higher incentives and raw material expenses.
Others were more optimistic. In a research note analysts Sneha Prashant and Abhishek Jain from brokerage HDFC Securities Ltd said, they expect the JLR business to continue its strong traction owing to factors including a strong product pipeline and a further pick up in demand from China. Prashant and Jain estimates a compounded annual growth rate of 11% through fiscal 2017-19. It would be led by a ramp up of Discovery WHAT and launch of new models.
It was an equally bad quarter for Tata Motors’ India operations. A sharp drop of 34% in medium and heavy commercial vehicle sales in the domestic market led to a loss of ₹466.85 crore for the stand-alone entity against a profit of ₹34 crore.
The first quarter results have not met company’s expectations, said Guenter Butschek, managing director and chief executive at Tata Motors in the statement. Tata Motors he added is “working with renewed focus and energy to improve performance” of the commercial and passenger vehicle businesses. The company has sharpened focus on cost improvement measures and market share growth and it’s hopeful the efforts will pay off in the forthcoming quarters.
Tata Motors’ fell 3.17% on the BSE, while the Sensex shed 0.68% to ens at 31,797.84 points.