Tata Motors takes Rs2,500 cr hit in China port blast

09 Nov 2015

Tata Motors on Friday reported a loss of Rs430 crore for the September quarter, its first consolidated loss in more than five years.

An exceptional charge of nearly Rs2,500 crore on account of damage of 5,800 Jaguar Land Rover (JLR) vehicles following an explosion at the port of Tianjin, China in August hurt the company's financials. ''Insurance claim (against the damage) may take some months to conclude,'' said C Ramakrishnan, chief financial officer.

The  country's largest automobile manufacturer's consolidated bottomline ended in the negative for the first time in a quarter since it turned around JLR operations in 2010-11.

Net sales grew a modest 1.2 per cent to Rs61,318 crore. Consolidated net loss was against a Bloomberg analyst poll expectation of a net profit of Rs2,190 crore.

The Mumbai-based company had reported net profit of Rs3,291 crore during the same quarter last year.

''JLR's higher manufacturing and launch costs, unfavourable foreign exchange revaluations, less favourable sales mix offset partially by higher wholesale volume impacted overall margins,'' added Ramakrishnan.

Consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) margin stood at 12.6 per cent for the quarter, against 17 per cent in the same quarter last year. It reported a tax credit of Rs703 crore during the quarter, which was on account of previous unabsorbed losses.

The company's UK-based arm JLR, too, reported a loss of £92 million (Rs920 crore) during the quarter, against £450 million (Rs4,500 crore) in the corresponding quarter last year.

The profit decline was driven by a contraction in operating margins at JLR. JLR's operating margin declined 720 basis points year-on-year to 12.2 per cent on weaker China sales, unfavourable currency revaluations, higher manufacturing and launch costs in China.

Sales from China, which was its single biggest market in the world, continued to be subdued. Its share halved to 13.5 per cent during the quarter, against 27 per cent posted in the same quarter last year.

In contrast, the company's standalone performance surprised positively, with sales growing 20 per cent year-on-year to Rs10,501 crore. Operating margin for the came in at 6.8 per cent, which was higher than analyst estimates.

''The China market is growing again though we are selling in China less vehicle than in the UK. China sales reported improvement for the first time in four months. We are confident of sales improving in the China region,'' said Ralph Speth, chief executive, Jaguar Land Rover.

The stand-alone entity marked the biggest gain with operating margins improving to 6.8 per cent, an 840 basis point improvement on a year-on-year basis. This was achieved on the back of continued improvement in volumes in medium and heavy commercial vehicles (MHCV), ongoing cost reduction and other initiatives.

It managed to significantly trim losses to Rs287 crore, against Rs1,846 crore posted in the same quarter last year. Ebitda margins last year same quarter stood negative 1.6 per cent. Net sales improved significantly to Rs10,501 crore, a rise of 20 per cent, against Rs8,752 crore reported in the same quarter last year.

While total passenger vehicle sales grew six per cent commercial vehicle sales marked a drop of 2.7 per cent. Demand for MHCV has shown no drop despite a price increase in October.

Ravi Pisharody, executive director (commercial vehicle), said, ''We undertook a price increase of Rs 35,000-60,000 which had with ABS and some features added to the vehicles. There is a fairly strong continuation of demand. We entered November with a strong order book. The third quarter is looking reasonably strong despite the price increase.''