Gold Silver Reports — Tata Motors Brakes on Brexit as Net Slips 57% in Q1 — BEND IN THE ROAD Co posts net of Rs 2,236 crore but takes a forex loss of Rs 1,800-crore plus, weaker product mix also has an impact
Tata Motors’ fiscal first-quarter consolidated net profit shrank to less than half from a year earlier, hit by a forex loss related to Britain’s decision to exit the European Union and due to a weaker product mix.
The nation’s largest automobile company by revenue posted a net profit of `2,236 crore for the quarter through June, a 57% fall compared with the `5,231 crore profit it posted in the same period last year.
While it took a forex loss of £207 million (more than `1,800 crore at current exchange rate), the company’s share of pro fit from joint ventures and the receipt of another instalment of insurance payment related to the 2015 explosions at China’s Tianjin port prevented a deeper dent on profit.
Jaguar Land Rover, the UK subsidiary that has been the money-spinner for Tata Motors for years, sold more than 1 lakh units of Land Rover vehicles for the first time last quarter. The unit’s performance drove the company’s consolidated revenue 9.2% higher to `66,005 crore .
But operating profit margin shrank 6.5 percentage points to 12.9%. Consolidated Ebitda margin excluding forex revaluation was relatively better at around 14%, said chief financi al officer CR Ramakrishnan .
“JLR posted solid sales volume and revenue during the quarter, but lower Ebitda due to unfavorable fo rex impact and lower local market incentive in China compared to the corresponding quarter affected the margins,“ he said, while also expressing caution on the market developments in Europe and China.“We will continue to closely monitor and assess market conditions in the UK and EU post Brexit as well as China as the target GDP growth rate comes down.“
Ralf Speth, chief executive at JLR, said it was very difficult to predict currency movement and its impact on the margin.But the company’s steps of hedging currency, expanding geographical footprint and new products will help it overcome challenges, if any, on account of possible Brexit-related trade barriers, he said.
Standalone Indian business’ revenue for the quarter rose to `11,276 crore from `10,272 crore a year earlier. Standalone Ebitda was `588 crore, with an operating margin of 5.7%. Net profit was `15 crore.
On the domestic business front, Ramakrishnan said the demand for medium and heavy commercial vehicle is likely to sustain. In the passenger vehicle division, demand for the new Tiago hatchback and planned new launches will drive performance in the domestic market, he added.
The company predicted the automotive market to grow in the double digits in fiscal 2017, helped by a favourable macroeconomic environment.
Chief executive Guenter Butcheck said a new organisation structure will be rolled out at the company on January 1, 2017, which will strive to bring in accountability and speed. A new performance management system, too, will be implemented starting next year. — Neal Bhai Reports