Tata Motors net dips 25.5%

Struggling Indian operations and slowing sales of Jaguar Land Rover (JLR) weighed on the consolidated performance of Tata Motors, India’s biggest automobile manufacturer, with the company’s net profit for the December 2014 quarter missing estimates by a huge margin. Though a few one-offs impacted profits during the quarter, profits at the operating and net levels would have been lower than Street expectations.

Net profit fell 25.5 per cent to Rs 3,581 crore from Rs 4,804 crore in the year-ago period. Bloomberg had estimated net profit at Rs 4,972 crore.

Unfavourable revaluations of foreign currency debt, unrealised hedges, higher depreciation and amortisation and a provision for capital cost of buildings at Singur, amounting to Rs 310 crore, also impacted margins and profits.

The company’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin fell to 15.4 per cent at a consolidated level from 16.6 per cent a year earlier. Except for costs of goods sold, all costs rose faster than the growth in sales, impacting margins. The profit before interest, tax, depreciation and other income stood at Rs 10,054 crore, against Rs 9,958 crore in the year-ago period.

At the standalone level, the company posted one of its biggest losses, of Rs 2,123 crore, against a profit of Rs 1,251 crore for the year-ago period (when it had received tax credit of Rs 630 crore).

It had also earned a profit of Rs 1,948 crore on sale of investment in subsidiaries in the December quarter of 2013, inflating profits to that extent at that time. As such, a better comparison is in terms of operating performance. In the December 2014 quarter, the company reported a loss before interest, depreciation, tax and other income (LBIDT) of Rs 561 crore (excluding Rs 310 crore on account of Singur) compared to Rs 459 crore a year earlier. At -6.2 per cent, the LBIDT margin was slightly lower than -5.9 per cent in the year-ago period. At the standalone level, the reported Ebitda margin fell to -8.5 per cent from -4.3 per cent a year earlier. Net consolidated sales stood at Rs 69,942 crore, 9.6 per cent more than Rs 64,378 crore in the December quarter of 2013. Sales in India, as well as of JLR, were ahead of estimates, helping Tata Motors beat the Bloomberg consensus expectation of Rs 66,837 crore. During the December quarter, retail JLR sales fell one per cent, the first quarterly fall in five years. JLR’s revenue stood at £5,879 million (Rs 55,463 crore, at the current exchange rate of 94.34 rupees to a pound), against £5,328 million (Rs 50,264 crore).

Demand in the brand’s biggest market, China, grew the slowest in several quarters. JLR said one of its models was being phased out, while two others were replaced by new ones. JLR’s net profit disappointed, at £593 million (Rs 5,600 crore), a drop of four per cent from £619 million (Rs 5,800 crore) in the corresponding quarter of 2013.

JLR chief executive Ralph Speth said, “We are optimistic about China growth. We are expanding our reach in that market and adding one dealership every 10 days.” At the standalone front, volumes dipped to 127,484 units from 132,087 units a year earlier, a fall of 3.4 per cent. While passenger vehicle sales have been on the rise, sales of commercial vehicle sales, especially small ones, have been declining.