Q3 Net up: JLR a let-down for Tata Motors

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Published: February 6, 2018 6:24:52 AM

Tata Motors’ standalone business, which has been posting losses for the last five quarters or since the second quarter of fiscal year 2017, reported a turnaround with a profit of Rs 184 crore in the quarter.

Automaker Tata Motors posted an 11-fold growth in third quarter net profit to Rs 1,215 crore year-on-year, but failed to meet Bloomberg consensus estimates of Rs 2,350 crore due to the significantly weaker performance of its UK subsidiary Jaguar Land Rover (JLR). (Reuters)

Automaker Tata Motors posted an 11-fold growth in third quarter net profit to Rs 1,215 crore year-on-year, but failed to meet Bloomberg consensus estimates of Rs 2,350 crore due to the significantly weaker performance of its UK subsidiary Jaguar Land Rover (JLR). JLR reported a profit before tax of £192 in the third quarter, which was 25% less than what it had reported in the same period last fiscal. This was due to a cyclical weakness in its US and UK markets and uncertainty on the future of diesel cars in Europe and UK. Clearing of the 2017 Range Rover and Range Rover Sport inventory for higher incentives also hurt profitability. Tata Motors’ consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) grew 420 basis points to 11.90% in the quarter; however, it was less than analysts’ estimate of 12.2%. Net sales, on the other hand, beat estimates, growing 16% in the quarter to Rs 74,156 crore.

However, Tata Motors’ standalone business, which has been posting losses for the last five quarters or since the second quarter of fiscal year 2017, reported a turnaround with a profit of Rs 184 crore in the quarter. This was compared to a loss of Rs 1,046 crore in the same quarter last year. Revenues too jumped 59% to Rs 16,101 crore over the corresponding quarter of the previous year. Ebitda improved 750 basis points in the quarter to 9%. The standalone profitability improvement was attributed by the company to higher realisations, control on costs and operating leverage. It ended the quarter with a positive cash flow of Rs 1,082 crore.

Revenue grew on the back of strong traction in the company’s unit sales for the quarter, growing at 31% year-on-year. Sales of commercial vehicles (CVs) grew at over 35%, while passenger vehicle (PV) sales grew 22%. The Mumbai-based company’s medium and heavy commercial vehicle volumes grew by 54% in the quarter, owing to strong demand for higher tonnage trucks due to overloading restrictions and the increase in infrastructure activity in the country. The company claimed a 47.5% share in CVs and a 6.2% share of PVs sold in the country. Its PV sales growth was driven by new-generation models like the Tiago and Hexa, and the newly launched compact-SUV Nexon.

N Chandrasekaran, chairman, Tata Motors, said, “In the domestic business, the ‘turnaround strategy’ is delivering results. Our focus on market share gain coupled with operational improvements is working well, with both commercial and passenger vehicles businesses delivering improved results.” He told analysts in a post-earnings conference call, “Both the domestic business of Tata Motors and JLR are committed to the electric vehicle journey and we wish to stay ahead of the curve. For Tata Motors, our focus was on gaining market share back in the CV division, and I am very happy to see the progress. With respect to JLR, the business will continue to have tremendous focus on innovation and new products. I expect the fourth quarter to be better for both JLR and Tata Motors.”

Ralf Speth, CEO, JLR, said, “This year is a milestone for Jaguar Land Rover as we prepare to launch our first ever electric car, the Jaguar I-PACE, and Range Rover plug-in hybrids. We expect a stronger all-around performance in the fourth quarter driven by new models, seasonality, and improved profitability.” The company plans to end the year with a total investment of £4-4.35 billion. JLR’s investment spending exceeded £1 billion in the quarter, due to its new product launches, global expansion plans and new technology programmes. PB Balaji, CFO, Tata Motors, said that the global environment may remain a challenge going ahead with the UK and the US markets remaining weak for JLR. However, he was positive of a strong all-round performance of the company’s domestic business. He said, “The regulatory environment remains challenging but we will continue on our turnaround strategy with rising infrastructure spending and disposable incomes.” The Tata Motors stock closed the day at Rs 396.05, up 3.12%. The results were declared after market hours.

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