Tata Motors reported a net profit of Rs. 21.78 crore for the quarter ended September 2009 on a consolidated basis thanks to cost control measures and profit from investments in associate firms. A year ago, the company had a loss of Rs. 941.75 crore.
The company has reported a loss of Rs. 2.15 crore (Rs. 920 crore loss) from ordinary activities but the share of minority interest amounted to Rs. 4.24 crore and the profit in respect of investment in associate companies amounted to Rs. 19.69 crore, totalling a net profit of Rs 21.78 crore.
Net sales were lower by 8 per cent at Rs. 20,889.44 crore against Rs. 22,825.05 crore while the consolidated operating profit was marginally higher at Rs. 1,591.62 crore. The performance was aided by a strong revival in Indian operations which had earlier reported an operating profit of Rs. 1,066 crore for the second quarter as also operating profit at the Jaguar Land Rover business.
An increase in depreciation and interest costs due to increased borrowing to support investments and new product development partly offset the operating profit. Jaguar Land Rover’s second-quarter loss fell to 60 million pound sterling from 240 million pound sterling in the same period last year. It reported an operating profit of 41.3 million pound sterling, aided by a 23 per cent growth in wholesale volumes over the previous quarter.
The company also benefited from a 13 per cent drop in input costs to Rs. 11,930 crore.
According to the company, the business is witnessing some stability in the external environment with some key markets such as the U.K., Russia and China showing signs of recovery. The new products have been well received in the market.
Tata Motors was considering options for raising funds to reduce its debt of Rs. 21,000 crore. Of this, Jaguar Land Rover accounted for Rs. 9,000 crore, said C. Ramakrishnan, Chief Financial Officer, Tata Motors. Most of the cars sold during the quarter were higher margin cars, “which is why the fixed marketing costs got reduced and all the products are commanding high residual values,” he added.
According to Ravi Kant, Vice-Chairman, one of the two JLR plants in the western midlands may be shut down. “There is a lot of restructuring that is happening and the impact is still to kick in. Many of the cost-reduction measures which are under way in JLR should benefit us in the coming quarters.”
On the fears expressed in the U.K. regarding outsourcing of JLR jobs to India or China, Mr. Kant said, “We have not been prescriptive. But like any automobile company, we will have to bring down our break-even point to survive. The long-term sustainable strategy is to bring down break-even point but we are not saying what that would be.” Regarding the third quarter, he said, “things are improving but there is so much ambiguity and uncertainty in different markets. Hopefully, the worst is over.”