Brexit chaos erodes Rs 2,300 cr from Tata Motors' Q1 profit

The Brexit turmoil took a heavy toll on Tata Motors earnings for April-June, with the company today reporting a 57 percent plunge in net income at Rs 2,236 crore.

 

While a battered pound eroded Rs 2,296 crore from its profit, adverse commodity derivatives blew a hole of Rs 167 crore.

 

As the pound took a beating--sinking to a 31-year-low following the Brexit vote on June 24 -- the company's cash cow JLR took a 14 percent forex hit at Rs 2,296 crore, offsetting the higher income arising from better volumes, Tata Group CFO C Ramakrishnan told reporters here this evening.

 

As a result, net income of Jaguar Land Rover (JLR) fell 38.21 percent to 304 million pounds in the first quarter ended June, from 492 million pounds, while its revenue rose to 5,461 million pounds from 5,002 million pounds a year ago.

 

He said the overall numbers were driven down by lower market incentives in the quarter. The numbers would have been still lower but for the one-time income of Rs 478 crore, or 50 million pounds, from claims arising out of the Tianjin (China) fire last financial year.

 

"Operating performance of JLR reflects the overall higher wholesales, offset by adverse forex impact of 207 million pounds, including revaluation of 84 million pounds, mainly euro payables resulting from depreciation in the pound following the Brexit vote," Ramakrishnan said.

 

"Higher volumes in both standalone, as well as Jaguar Land Rover business, were more than offset by the adverse forex impact of Rs 2,296 crore and adverse commodity derivatives impact of Rs 167 crore. On top of that, JLR operating profit was also hit by lower local market incentives and higher depreciation and amortisation expenses."

 

For the quarter, consolidated revenue rose to Rs 67,056 crore from Rs 61,510 crore, driven by improvement in the businesses of both the parent as well as JLR on the back of strong sales in Britain, Europe, North America, China, whose volume share declined to 14.1 per cent in the reporting quarter from 20.5 per cent a year ago.

 

Despite this, the China JV chipped in a profit of 45 million pounds, Ramakrishnan said.

 

Despite the massive drop in numbers, the market lapped up the Tata Motors scrip, which rallied 4.24 percent to Rs 514.70 on BSE, whereas the benchmark Sensex recorded a marginal drop.

 

JLR sales numbers were driven by strong demand for the Discovery Sport, XE and the new F-Pace models in North America.

 

On a standalone basis, the company reported a net profit of Rs 25.75 crore for the June quarter, down 91.11 percent, year on year.

 

Standalone sales rose 10.21 percent to Rs 11,311.24 crore, from Rs 10,262.76 crore earlier. Sales, including exports of commercial and passenger vehicles, stood at 1,26,839 units, representing a growth of 8 per cent.

 

JLR wholesales (excluding China JV) stood at 1,20,776 units, he said, adding that China JV wholesales for the quarter came in at 13,558 units.

 

Tata Motors said after approval by shareholders at the AGM, the board had cleared a resolution to raise Rs 3,000 crore. The funds will be mopped up through the issue of secured/unsecured debentures and bonds in one or more tranches from time to time.

 

On a standalone basis, the company saw its net income diving more than 90 per cent to a paltry Rs 26 crore despite all the segments witnessing growth -- M&HCV expanded by 7.8 per cent, LCV 11.6 per cent, passenger vehicles 6.3 per cent and car segment 15.1 per cent, driven by the demand for its new launch Tiago.

 

Ramakrishnan said the standalone numbers include those of its two local JVs - with Cummins and Fait - and are as per the Indian Accounting Standards (Ind-AS).

 

The strong growth in all segments along with ongoing cost reduction and other margin improvement initiatives led to the improvement of 60 bps in the Ebitda margin of the standalone business, he said.