Tata Motors turns in PBT of ~1,350 cr
But says coronavirus in China, one of its biggest markets, may dent profits
Tata Motors reported a profit on a consolidated basis for the quarter that ended December 31. The owner of Jaguar Land Rover (JLR) benefited from brisk growth in China sales for a sixth month in a row. Earnings also got a boost from better sales mix and a cost-saving 'Project Charge'.
During the quarter, profit before tax was ~1,350 crore; the same period a year before had seen a loss before tax of ~29,228 crore. Net profit at the consolidated level at the end of these three months was ~1,756 crore, against a net loss of ~26,961 crore in the corresponding period last year. Total revenue from operations was ~71,676 crore, compared to ~76,916 crore in the year-ago period. Revenue at JLR, the British arm, rose to £6.4 billion, up 2.8 per cent compared to the same period of 2018-19.
P B Balaji, chief financial officer for the Tata Motors group, cautioned that demand in China — one of its most significant markets in terms of volume and profit — could be hit with the Coronavirus outbreak, derailing the margin targets for the ongoing financial year.
“A few things on the horizon worry us, the big one being this,” Balaji said on Thursday. Saying they expected a three per cent Ebit (earnings before interest and tax) margin for JLR, he cautioned that this could be hit by the virus outbreak, which needed to be “watched closely...it’s a developing situation and people are in the midst of a Chinese New Year break till February 8”. JLR’S retail sales in China rose rose 34.6 per cent, contributing 19.4 per cent in total sales. JLR’S overall sales during the quarter contracted 2.3 per cent to 141,200 units.
The UK subsidiary has exceeded the Project Charge target it had envisaged. JLR says it will be able to save £2.9 billion in China recovery as against the target of £2.5 billion by March 2020.
A higher contribution of more expensive models in the overall mix and the cost savings project helped the consolidated entity report an Ebit margin of 2.3 per cent. It plans to save an additional £1.9 bn through a focus on material cost reduction.
On the effect of Brexit from the European Union, from Friday formally, Balaji said the earlier concern with regard to the first phase of Brexit had remained unfounded. "We now need to see how the negotiations (between the EU and Britain) from now till the end of December pan out." Fears regarding a 'hard Brexit' that the company had expressed in previous quarters were not there any more, he stated.