Tata Motors posts Q3 PBT at Rs 1,350 cr, says coronavirus may dent profits

Topics Tata Motors | Coronavirus

Rohit Suri, president and MD, JLR India, at the launch of the Range Rover Evoque, in Mumbai on Thursday (Photo: Kamlesh Pednekar)
Tata Motors reported a profit on a consolidated basis for the quarter that ended December 31.

The owner of Jaguar Land Rover (JLR) benefited from brisk growth in China sales for a sixth month in a row. Earnings also got a boost from better sales mix and a cost-saving 'Project Charge'.  

During the quarter, profit before tax was Rs 1,350 crore; the same period a year before had seen a loss before tax of Rs 29,228 crore. Net profit at the consolidated level at the end of these three months was Rs 1,756 crore, against a net loss of Rs 26,961 crore in the corresponding period last year. Total revenue from operations was Rs 71,676 crore, compared to Rs 76,916 crore in the year-ago period. 

Revenue at JLR, the British arm, rose to £6.4 billion, up 2.8 per cent compared to the same period of 2018-19.

P B Balaji, chief financial officer for the Tata Motors group, cautioned that demand in China — one of its most significant markets in terms of volume and profit — could be hit with the Coronavirus outbreak, derailing the margin targets for the ongoing financial year. 

“A few things on the horizon worry us, the big one being this,”  Balaji said on Thursday.  Saying they expected a three per cent Ebit (earnings before interest and tax) margin for JLR, he cautioned that this could be hit by the virus outbreak, which needed to be “watched closely...It’s a developing situation and people are in the midst of a Chinese New Year break till February 8”. JLR’s retail sales in China rose rose 34.6 per cent, contributing 19.4 per cent in total sales. JLR’s overall sales during the quarter contracted 2.3 per cent to 141,200 units. 

 

 
The UK subsidiary has exceeded the Project Charge target it had envisaged. JLR says it will be able to save £2.9 billion in China recovery as against the target of £2.5 billion by March 2020. A higher contribution of more expensive models in the overall mix and the cost savings project helped the consolidated entity report an Ebit margin of 2.3 per cent. It plans to save an additional £1.9 bn through a focus on material cost reduction.

On the effect of Brexit from the European Union, from Friday formally, Balaji said the earlier concern with regard to the first phase of Brexit had remained unfounded.  "We now need to see how the negotiations (between the EU and Britain) from now till the end of December pan out." Fears regarding a 'hard Brexit' that the company had expressed in previous quarters were not there any more, he stated.   

Meanwhile, poor sales of medium and heavy commercial vehicles weighed on India operations. The Indian arm posted a net loss of Rs 1,039.5 crore, as against a profit of Rs 617.6 crore in the year-ago quarter. Standalone total revenue contracted to Rs 10,843 crore as compared with Rs 16,208 crore in the earlier period.

While some things have started moving in the right direction, the company awaits a pick-up in the long-haul cargo segment. Also, the buoyancy seen in passenger vehicle sales during the festive season is not there.  “Internally, we are ready with everything and are waiting for an overall pick-up in demand which should help the overall business,” said Balaji. 

The share price ended nearly 1 per cent lower on the BSE exchange at Rs 186.2 on Thursday.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel