TaMo Net up on One-off Gains, but Revenue Falls Company cites fall in overall sales volume, contraction in big truck segment in India
Mumbai: Tata Motors posted a 42% increase in first-quarter consolidated net profit, with a large one-time gain on account of changes to the automaker’s pension benefit plans masking a poor operational performance.
Profit rose to .₹ 3,200 crore in the quarter through June from .₹ 2,260 crore a year earlier, with the one-time gain of .₹ 3,609 crore boosting the latest number.
Net consolidated revenue fell 10% to .₹ 58,651 crore, which it blamed on lower wholesale volumes, excluding from unit Jaguar Land Rover’s China joint venture, higher competitive incentive levels in the market to boost sales and a significant contraction in the medium and heavy truck segment in the Indian business. Earnings margin before interest, tax, depreciation and amortisation shrank 5.3 percentage points to 9.9%. JLR sales were up 30% from a year earlier in China and 16% in North America (16%), while remaining stable in Europe and falling 14% in the UK, the company said in a statement.
The British luxury-vehicle unit has been the money spinner for Tata Motors for several years now, offsetting its weak performance in the home market of India and propping up the consolidated results. Strong performance in the January-March quarter also affected the sales numbers in the first fiscal quarter, the
Profit rose to 3,200 crore in the quarter through June from 2,260 crore a year earlier, with the one-time gain of 3,609 crore boosting the latest number
company said. Also, product launches and spending on growth increased cost.
On the standalone, or Indian, business, a double-digit decline in commercial vehicle sales and sluggish passenger vehicle volumes pulled revenue lower by 11% to .₹ 9,207 crore. It posted a standalone loss of .₹ 467 crore for the quarter. Managing director Guenter Butschek said the results had not met internal expectations. The company is working with renewed focus and energy to improve performance of its commercial and passenger vehicle businesses, he said. The company’s focus on revenue and market share growth, cost reduction initiatives and efficiency improvements has significantly enhanced in the last few months, he said.
“Leveraging the expected market recovery, we are confident that these initia- tives will help us to present significant improvement of our financials in the coming quarters,” he said. According to brokerage house Sharekhan, the earnings were below expectations.
Margin pressures in both the standalone business (due to declining volumes and heightened discounting) and JLR (on account of higher material costs and variable marketing expenses, particularly in the US market) led to operating profit falling sharply from a year earlier, analyst Bharat Gianani said.
“Going ahead, increased competitive intensity and continued forex losses in the JLR hedge book would maintain pressure on the margins,” he wrote in a note to clients, while maintaining a ‘Neutral’ view on the stock.