Tata Motors Q1 profit drops 49% to Rs 2,769 crore

India’s largest automobile maker, Tata Motors, said its net profit for the April-June period dropped 49 per cent to Rs 2,769 crore, as its retail sales for the most valuable products, Jaguar and Land Rover, plunged 33 per cent in China. The net was lesser than the average of 30 analysts’ projection of Rs 3,234 crore reported by Bloomberg. Net sales dropped six per cent to Rs 61,020 crore over the past year, trailing Bloomberg’s estimate of Rs 64,362 crore.

“In China, JLR suffered due to macro economic challenges as well as local production related issues,” Chandrasekaran Ramakrishnan, chief financial officer of the company, said while addressing the media on Friday. The company, manufacturing in China since last year through a joint venture with local partner Chery, has not been able to produce as per schedule. “We hope with the ramp up in local production, we will be able to address some of these issues,” he said.

China, which is one of the largest markets for luxury cars, is seeing a slowdown in demand for luxury cars. JLR, luxury unit of the Mumbai-based company, had cut its sales targets and prices in China to face some of these challenges. JLR's operating margins also declined sharply during the quarter due to readjustments in China. The management has conveyed margins are likely to remain under pressure during 2015-16.

In the quarter, the firm partially recovered the slump in China with increased demand in Europe and the US. It reported sale of 114,452 vehicles, lower than 115,156 vehicles sold in the corresponding period of the previous year.

“We have delivered solid financial earnings in this quarter despite a challenging macroeconomic environment, particularly in China,” said Ralf Speth, chief executive officer, JLR. Profit at JLR dropped 29 per cent to £492 million ($764 million).

The domestic business, however, supported consolidated revenues, as sales of commercial vehicles improved. Stand-alone revenue grew 21 per cent year-on-year to Rs 9,290 crore, while operating margin rose 196 basis points to 4.7 per cent sequentially. Passenger vehicles segment in India supported sales. The domestic passenger vehicles segment grew 27.4 per cent y-o-y in the quarter with car segment growth of 42.2 per cent.

Shares of the company rose 2.7 per cent to Rs 393.4 on the BSE. But, the company's american depository receipts, listed on the NYSE, were trading at $29.83 apiece at 10.05 pm, up 0.5 per cent from the previous close.