Tata Motors’ reported 96% decline in its consolidated net profit to ₹112 crore for the third quarter ended December 31, as compared with ₹2,953 crore in the same period of last year, due to a decline in the sales of medium and heavy commercial vehicles and a squeeze in margins from the Jaguar and Land Rover business.
Its posted a consolidated revenue of ₹67,484 crore during the quarter as compared with ₹70,567 crore during the same period a year ago.
On a standalone basis, the company widened its loss to ₹1,046 crore during the quarter as compared with ₹137 crore in the year ago period. Revenue from the standalone business remained flat at ₹10,617 crore.
“We have hit the road to recovery but unfortunately we had faced lot of headwinds in the third quarter,” said Guenter Butschek, Chief Executive Officer & Managing Director, Tata Motors’ during the post earnings media conference.
Owning to demonetisation, the automaker saw demand shrinkage in the commercial vehicle segment with sales in M&HCV witnessing a fall of 9% y-o-y while LCV segment remained flat.
Passenger vehicles grew by 25.4% y-o-y with car segment posting a growth of 31.1% on the back of continued strong response of Tiago, Tata Motors’ said. Exports grew 34.6% y-o-y.
Operating profit for Jaguar Land Rover during the quarter was £611, sharply down from £834 million reported in the same period of the previous year. This resulted in a fall in margins to 9.3% from 14.4%.
The company said the margin contraction of the Jaguar Land Rover business reflected lower wholesale volume and less favourable product mix, unfavourable variable marketing expense, and a higher cost for introducing new models.
“We expect a strong fourth quarter for M&HCV. On a full year basis, we expect sales to be flat,” said C Ramakrishnan, chief financial officer, Tata Motors’ adding that the company expects better margins in Q4.
Reuters adds:
Tata Motors’ domestic business reported a net loss of 10.46 billion rupees as it revamped its passenger vehicles business to boost sales and gain market share.
Earlier in February, Tata Motors unveiled a new brand called TAMO, aimed at testing new technologies and enabling the company to become more responsive to changing market trends.
“What is it that we need to be a high performance organisation - being lean, it's about being agile and it’s about having clearly addressed and delegated accountability,” Mr. Butschek said.
The company is also implementing a management transformation from the beginning of April aimed at bringing in speed, simplicity and agility to deal with market volatility, he said.
Car makers in India were also hit in the third quarter by Prime Minister Narendra Modi's “demonetisation” move in November, when he declared notes of 500 rupees and 1,000 rupees illegal tender, taking about 86% of total currency out of circulation.
Other issues facing JLR include Britain's Brexit vote and U.S. President Donald Trump’s promised protectionist policies, according to a Jan. 20 report by Mumbai-based IDFC Securities. The United States accounts for about 25% of JLR's sales.
“Given this, JLR is in a more precarious position than its peers,” IDFC Securities analyst Deepak Jain said in the report.
