Tata Motors Q1: Domestic slowdown hurts, JLR boosts growth

Nachiket Kelkar
moneycontrol.com

Tata Motors first quarter consolidated net profit rose 12% year-on-year at Rs 2,245 crore. But it missed analysts expectations due to a foreign exchange loss and slow sales in the domestic market. The India's largest commercial vehicle maker, which also owns British luxury Jaguar Land Rover unit, reported a consolidated revenue of Rs 43,324 crore in April-June, up 30% from a year ago. Analysts on average had expected Tata Motors to report a net profit of Rs 2,570 crore on revenue of Rs 42,500 crore. "Sales grew on the back of strong growth in volumes of new products and favourable market mix at JLR," the company said on Thursday. For instance, the Evoque has a long waiting list due to high demand from across the world and JLR is adding more shifts at its Halewood plant in UK to keep up the pace of production, said Ralf Speth, CEO of JLR. However, strong sales were offset by an exceptional loss of Rs 441 crore due to revaluation of foreign currency borrowings, deposits and loans arising from the depreciation of Indian Rupee. JLR GROWTH JLR's net profit in April-June rose 7% to GBP 236 million, while revenue rose 35% to GBP 3.64 billion. Its volumes rose 34% from a year ago to 83,452 units, which included 11,774 units of Jaguar and 71,678 units of Land Rover. "Growth in volumes was driven by sales of new Range Rover Evoque and strong demand from China, which grew 91%," it said. China sales comprised 22.2% of overall volumes in Q1, its biggest market. While demand remains strong in emerging markets, Speth is concerned of the economic uncertainties in developed countries, led by Euro zone debt crisis. "We are a British company and have a big market in continental Europe. At this moment, nobody can guess correctly what's going on in the economy. We are constantly checking the economies and we see, especially in the very southern hemisphere of Europe there is a slowdown," he said. Apart from China, the company is also seeing strong growth in South America, Russia and India. DOMESTIC SLOWDOWN HURTS Tata Motors has taken a beating in India due the overall sales slowdown in medium and heavy commercial vehicles and passenger cars, which has also hurt other players. Its standalone net profit was down 49% to Rs 205 crore, while revenue declined to Rs 10,586 crore from Rs 11,624 crore a yyear ago. "Weak macroeconomic parameters, increase in excise duty and poor availibility of freight hurt MHCV sales," said C Ramakrishnan, CFO. Passenger car sales also remain slow due to high petrol prices and expensive loans. That apart, the standalone profit was also impacted by Rs 161 crore forex loss in Q1. Tata Motors' standalone operating margin declined to 7.3% from 8.8% a year ago. Its total sales were down 4% at 190,483 units last quarter. Its CV sales rose 1.3%, helped by demand for small CVs. PV sales fell 10%. The company is hoping to do better in the next quarter, but Ramakrishnan warned that domestic sales could remain slow in the near term given the overall slow GDP growth and competitive pressure. "Slower industrial growth, weaker economic outlook and concern on deregulation of diesel prices will impact the overall demand. Freight rates have dipped marginally...We see demand pressure in medium & heavy trucks," he said. The company hopes there will be a pick up in infrastructure spending and recovery in monsoon that will propel demand. Tata Motors shares closed at Rs 239.30 down 0.91% on NSE on Thursday. Nachiket.kelkar@network18online.com