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Informist, Thursday, Aug 1, 2024

 

By Darshan Nakhwa 

 

MUMBAI – Tata Motors Ltd today reported a sharp expansion in consolidated net profit for Apr-Jun on account of moderation in raw material prices, higher average selling price, and an increased share of high-margin Jaguar Land Rover and commercial vehicles in overall sales. Other factors such as the favourable foreign exchange rate and the automaker's cost reduction efforts also aided the growth in the metric.

 

The company reported a net profit of 55.7 bln rupees for the June quarter, compared with 32.03 bln rupees in the year-ago period. Analysts had projected the bottomline at 53.93 bln rupees for the quarter. The company also recorded an exceptional income of 430 mln rupees for the quarter, compared to a cost of 6.77 bln rupees in the year-ago period. Exceptional income reflects reversal of cost recognised for reimagine strategy at JLR and reversal of provision for the Russian market. 

 

In Apr-Jun, Tata Motors' consolidated earnings before interest, tax, depreciation, and amortisation rose slightly over 6% on year to 155.7 bln rupees, but its EBITDA margin was flat on year at 14.4%. Brokerages had estimated the company's EBITDA at 149.39 bln rupees and EBITDA margin in the range of 13.2%-13.8%.

 

Total revenue from operations of the company came in at 1.08 trln rupees, up 5.7% from 1.02 trln rupees in the year-ago period. Analysts saw the company's topline at 1.09 trln rupees during the quarter. Its other income rose to 15.75 bln rupees from 13.61 bln rupees in Apr-Jun 2023. 

 

The company's topline growth came on the back of a 2.5% year-on-year increase in its overall sales, including despatches of Jaguar Land Rover and passenger and commercial vehicles. The company sold a total of 330,300 vehicles during the quarter. Its sales of commercial vehicles, including the Tata Daewoo range, rose 6% on year to 93,410 units, but passenger vehicle despatches fell 1% on year to 138,682 units.

 

The automaker's subsidiary Jaguar Land Rover sold 97,755 vehicles in Apr-Jun, 5% higher than in the year-ago period. During the quarter, it dispatched 8,227 units of Jaguar-branded vehicles and 89,528 units of Land Rover-branded vehicles.

 

Compared to the topline growth, the automaker's total expenses rose 2.7% on year to just over 1.00 trln rupees in Apr-Jun, driven by costs related to employee benefits and product development and other expenses. Its employee-related costs rose nearly 20% on year to 118.02 bln rupees, and other expenses grew slightly over 6% on year to 197.33 bln rupees. Product development costs rose 14% on year to 27.59 bln rupees. Cost of material consumed--the biggest expense incurred by the company--was flat on year at 627.14 bln rupees.

 

In Apr-Jun, the company's free cash flows was 12 bln rupees, driven by strong improvement in cash profits, partially offset due to seasonality. Net automotive debt was at 186 bln rupees.

 

On the outlook for 2024-25, the company said that in the rest of the ongoing year, global demand is expected to remain muted, but domestic demand is likely to see gradual improvement on account of continued investments in infrastructure, healthy monsoon, favourable macros, and festival demand. Commodities prices are likely to remain range-bound. 

 

JAGUAR LAND ROVER

Jaguar Land Rover steered the performance of Tata Motors in Apr-Jun. The subsidiary earned a profit before tax of 73.4 bln rupees, EBITDA of 121.7 bln rupees and topline of 769 bln rupees, according to the company's investor presentation. JLR’s financial performance was driven by higher wholesale volumes, investment in demand generation, and a favourable pricing environment. 

 

In the quarter under review, JLR's EBITDA margin contracted to 15.8% from 16.2% in the year-ago period. It also reported free cash flows of 230 mln pound sterling and its net debt was at 1 bln pound sterling.

 

On the outlook for the rest of the financial year, the company said, "We are likely to witness constrained production in Q2 (Jul-Sep) and Q3 (Oct-Dec) reflecting the annual summer plant shutdown and floods at a key aluminum supplier. As we work towards mitigation and recovery, we will hold our guidance on our key full year financial deliverables of >8.5?IT and achieving net cash."

 

Responding to a question on the manufacturing of JLR's upcoming electric vehicle products in India, Tata Motors Chief Financial Officer P.B. Balaji said, "The JLR India business is on a very good wicket and growing very strongly, and we have just localised the manufacturing of Range Rover and Range Rover Sport. We are seeing huge pickup in orders on that front." However, at this point, the government's electric vehicle policy, which promotes domestic manufacturing and reduces import duties on certain electric cars, is not aligned with JLR's India strategy and the company has no plans to utilise that policy to expand JLR business in India, he added.

 

PASSENGER, COMMERCIAL VEHICLES

Tata Motors net sales from the commercial vehicles business rose 5.1% on year to 178.5 bln rupees in Apr-Jun, and its profit before tax grew nearly 64% on year to 15.35 bln rupees. Its EBITDA came in at 20.78 bln rupees and EBITDA margin expanded 220 bps on year to 11.6% due to better realisations and material cost savings.

 

In the rest of 2024-25, the company expects the forecast of a healthy monsoon, policy continuity, and continuing thrust on infra-related development projects by the government to improve the demand for commercial vehicles. 

 

Tata Motors passenger vehicle business revenue fell 7.7% on year to 118.5 bln rupees and the bottomline before tax declined to 1.73 bln rupees from 1.86 bln rupees in the year-ago period. However, its EBITDA margin expanded 50 basis points to 5.8%, driven by material cost reductions.

 

Going forward, the company expects the demand to pick up during the festival period. "New product launches will augur well for the business. Our focus is to increase addressable market by introducing new nameplates, strengthen multi-powertrain strategy to leverage industry powertrain shifts and proactively grow the electric vehicle market in India while maintaining market leadership," the company said. 

 

Today, shares of the company ended 1.06% lower at 1,144.40 rupees on the National Stock Exchange. The company announced its results post market hours.  End

 

Edited by Manisha Baxla

 

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