Tata Motors reports marginal decline in Q3 net profit

Tata Motors Ltd, the automobile manufacturing arm of the Tata Group, posted a marginal decline in consolidated net profit for the quarter ended December 31, 2015, to Rs 3,508 crore, from Rs 3,581 crore in the December 2014 quarter. 

The company’s consolidated profit before tax, however, fell sharply to Rs 4,176 crore for the October-December 2015 period, down by 27 percent year-on-year. In a statement issued on Thursday, Tata Motors said the decline in profitability was a function of “weaker sales mix (both model and market), higher depreciation and amortisation expenses, non-recurrence of an annual China tax rebate (received in Q3FY15, but in current year, received in Q1FY16) and other items in the Jaguar Land Rover (JLR) business.” 

The decline in consolidated net profit was marginal due to a substantially lower tax burden on the company for the October-December period.  

For the December 2015 quarter, Tata Motors reported a consolidated turnover of Rs 72,256 crore, up 3 percent over the corresponding period a year ago. The marginal increase in revenues was a result of JLR exhibiting strong sales in overseas markets like the UK, Europe and North America, which helped partially offset the weakness faced in the Chinese market and weaker model mix in the quarter; and robust volume growth in the medium and heavy commercial vehicles (M&HCV).

During the quarter, Tata Motors’s M&HCV segment registered a 14.8 percent year-on-year volume growth, broadly in line with the resurgence in the M&HCV market as a whole. The growth in sales of such commercial vehicles was on account of continued replacement demand, initial fleet expansion demand, and better profitability of freight operators.  

Tata Motors’s commercial vehicle segment played a key role in helping the company post a 10.4 percent year-on-year growth in standalone revenues (domestic operations, excluding JLR) to Rs 10,001 crore during the October-December period.  

“This along with ongoing cost reduction and other margin improvement initiatives have resulted in improvement of 860 basis points year-on-year in the Ebitda (earnings before interest, tax, depreciation and amortisation) margin of the company,” Tata Motors’s statement said. The company’s standalone Ebitda margin stood at 5.7 percent.

On a net level, Tata Motors posted a loss of Rs 201 crore for the quarter, down from a loss of Rs 2,123 crore for the corresponding period last fiscal.  

JLR, the iconic British carmaker that Tata Motors acquired in 2008, posted revenues of £5.78 billion for the December 2015 quarter, down from £5,87 billion in the same period of fiscal 2014-15. The company’s net profit for the quarter was £440 million, down by 26 percent year-on-year.  

According to the company, the decline in profitability was a reflection of lower sales (in revenue terms) in China primarily driven by localisation of the Evoque and Discovery Sport, non-recurrence of the China tax rebate and a softer sales mix.