Mumbai: Tata Motors Friday reported a near halving of its net profit at Rs 2,768.91 crore for the three months through June, hit by a massive 50 percent fall in JLR profit due to a sales plunge in China.
The home-grown auto major had registered a consolidated net profit of Rs 5,398.21 crore in the same quarter last year.
The numbers would have been worse had it not been for the one-time tax gain from China (the quantum of which the company did not specify) as well as the 50 million pounds forex gains during the quarter, wherein its adjusted net income from JLR nearly halved to Rs 2,847 crore year-on-year in rupee terms.
This is the first major decline in both sales and profits for Tata Motor's cash-cow Jaguar-Land Rover brands since the company was turned around this early decade, following headwinds in China which is the largest market for the marquee British brands, which Tata Motors bought during the 2008 financial crisis for USD 2.8 billion from Ford.
From 29.7 percent share in its overall sales a year ago, the share of China sales fell to a low 14.4 percent in the reporting quarter, Tata Motors Group chief financial officer C Ramakrishnan told reporters here this evening.
He, however, said that weaker performance was on expected lines as JLR discontinued some major brands and launched new models globally as well as in China, where it also started locally producing some of the models at its JV with Cherry Auto.
"The financial performance in the quarter is lower than the strong corresponding quarter last year when its net stood at Rs 5,398.21 crore, which due to softer sales in China partially offset by strong performance in Britain, Europe and North America," he said.
However, he was quick to add that China remains a very important market for JLR as it is the world's largest car market and the fastest growing premium car market.
He also blamed higher base effect of last June quarter as one of the reasons for the low numbers this quarter as the company had reported a consolidated net profit of Rs 5,398.21 crore then which was one of its best in recent years.
Consolidated sales declined 6.2 percent to Rs 60,180.57 crore from Rs 64,150.74 crore, while JLR revenue fell 9.64 percent to 5.02 billion pounds from Rs 5.35 billion pounds, yanking down its pre-tax profit by over a third to 638 million pounds from 924 million pounds, as the China fall offset the strong performance in Britain, Europe and North America.
In rupee terms, JLR's adjusted net almost halved to Rs 2,847 crore year on year, the company said.
The Chinese economy has slowed to its slackest pace in 25 years and low consumer confidence is affecting car sales.
As a result, JLR sales in China fell by a third to 21,920 units during the June quarter, pulling down total sales at the luxury carmaker by 1 percent to 1,14,905 units, while its sales in Europe rose 28 percent to 28,878 units.
JLR wholesales stood at 1,10,648 units and retail sales, including from China JV with Cherry, stood at 1,14,905 units. Revenue for the quarter stood at 5,002 million pounds against 5,353 million pounds.
Operating margins stood at 821 million pounds or at 16.4 percent, down from 1,087 million pounds.
However, Land Rover maintained healthy sales with Range Rover, Range Rover Sport, Discovery and Discovery Sport and Defender all recording higher numbers.
Discovery Sport outsold Freelander which it replaced. But Evoque sale was lower due to the ramp up of localised production in China and softer market conditions in the world's largest auto market. Lower sales were also due poor show by the XF and XJ ahead of the all new lightweight XF and the refreshed XJ 16MY.
Overall China sales were impacted as JLR discontinued some of the successful models as well inventory management issues resulting from beginning of local production in China with its JV partner Cherry Automobiles, Ramakrishnan said.
The poor China show had a negative impact on the overall turnaround that its struggling parent reported in the home market on rising sales of its CVs and cars in the reporting quarter. It can be noted that Tata Motors India was heavily losing money for the past three years.
Despite the plunge in bottomline, the markets lapped up the Tata Motors shares which closed up 2.5 percent at Rs 392.55 on the BSE, whose main index Sensex slid 0.22 percent.
Bharat Gianani of Angel Broking gave a buy on the Tata Motors stocks saying the results are in line with their estimates, though the numbers marginally missed consensus expectations.
"Topline remained under pressure mainly on account of dip in JLR revenues, which were though flat, and per vehicle realisation dipped 6 percent on account of unfavourable product mix and pricing cuts in the Chinese market.
"Given the topline de-growth, operating margins at 16.4 percent came under pressure declining 230 bps, but this was in line with expectations. Operating margin pressures at JLR nearly halved its adjusted net at Rs 2,847 crore," he said.
On a standalone basis, Tata Motors India net profit fell 34.6 percent to Rs 257.57 crore while sales rose to Rs 9,197.62 crore from Rs 7,612.89 crore in the previous fiscal.
Sales, including exports, of commercial and passenger vehicles for the quarter stood at 1,17,439 units, up 6.2 percent, compared to the corresponding quarter last fiscal.
Domestic numbers were propped by higher commercial vehicles and passenger cars sales. While CV sales rose 20.7 percent driven by fleet replacement demand, LCV sales degrew 19 percent, passenger cars space led by the Zest, Bolt and the new Nano pushed up sales by 27.4 percent. The CV space was also helped by a 38 percent spike in exports.
