JLR’s One-Time Gain Cushions Tata Motors In Q1

Tata Motors Ltd.’s profit grew after its U.K. unit Jaguar Land Rover realised a one-time gain even as the luxury carmaker’s margins continue to fall.

Consolidated net profit of Tata Motors rose 25 percent in the quarter ended June over the year-ago period to Rs 3,182 crore, according to a stock exchange filing. The Bloomberg consensus estimate stood at Rs 1,480 crore.

The bottomline took a Rs 793-crore hit due a weaker rupee against the pound. This was still higher than estimates as JLR accounted for a Rs 3,609-crore gain after recalibrating the method of calculating pension liabilities and Rs 415 crore recovery related to Tianjin. Tata Motor would have been in loss if not for this gain at the luxury arm.

Sales at the luxury carmaker, which contributes two-thirds of the revenue for Tata Motors, slowed down in the quarter ended June as it sold fewer cars in the U.K. and faced higher competition in key markets like the U.S. Tata Motors’ sales slowed down in the domestic market as well due to transition to newer emission standards at the beginning of the quarter and disruption ahead of the Goods and Services Tax rollout in July.

Standalone Woes

Tata Motors’ standalone business reported a loss of Rs 467 crore compared to a Rs 26 crore profit a year ago. The losses narrowed from the previous quarter's Rs 818 crore.

India's largest truckmaker’s sales of medium and heavy commercial vehicles declined 34.8 percent compared to last year. Sales have improved over the previous three months, it said in the media statement.

The passenger vehicles segment sales grew 4.7 percent due to a strong demand for Tata Motors' new lineup of cars, including the Tiago, Hexa and Tigor. The company plans to launch its new car, Nexon, in September.

Butschek said the automaker has accelerated its cost reduction and efficiency improvement initiatives in the last few months.

JLR Revenue Falls

Jaguar Land Rover’s revenue fell 10 percent to Rs 47,045 crore. Operating margin narrowed 460 basis points to 7.9 percent, just lower than the company's medium term target.

Sales fell 4 percent over the same quarter last year. The F-Pace model saved the day with sales growing 8.2 percent to 17,600 units. The Evoque and Discovery Sport, two of JLR's most selling vehicles, saw sales decline by 1 percent over last year.

It sold 14.3 percent fewer vehicles in the U.K., while sales volume in the European region remained flat. China and North America were the only two markets to see sales grow at 30.3 percent and 15.6 percent, respectively.

JLR plans to spend around 4-4.35 billion pounds during the current fiscal, including an investment in a new manufacturing plant in Slovakia. Capital spending by JLR went up to almost 18 percent of its revenue in the three months ended June, from 13 percent earlier.

Jaguar Land-Rover has a string of new launches lined up this fiscal, including the new Discovery face-lift, the Range Rover Velar, Jaguar E-Pace, XF Sportbrake and the much anticipated fully electric I-Pace. The company expects new launches to drive sustainable profit growth.

Earnings Reaction

Tata Motors' American depositary receipts, which are traded in the U.S., fell as much as 8 percent after the earnings announcement on Wednesday evening.

Shares of Tata Motors Ltd. in India, had closed 3.1 percent lower on the BSE Sensex ahead of the results announcement.