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Tata Motors net profit falls steeply due to Brexit impact

TATAMOTORSTIAGOTata Motors said consolidated profit before tax and exceptional items for the April-June quarter fell to ₹2,066 crores from ₹6,340 crores last year due to the adverse foreign exchange impact.

The value of the British Pound fell drastically during the quarter due to the exit of the UK from the European Union. This had a foreign exchange impact of ₹2,296 crores on Tata Motors’ profit.

This also resulted in adverse commodity derivatives impact of ₹167 crores mainly in the Jaguar Land Rover business. “There was also lower local market incentive in the Jaguar Land Rover business as compared to the corresponding quarter last year and higher depreciation and amortization expenses as compared to the corresponding quarter last year,” Tata Motors said.

However, on the positive side, Jaguar Land Rover business saw strong sales in all the regions- UK, Europe, North America, China and other Overseas markets. The Indian market also saw continued volume growth in commercial vehicle segment.

As a result, consolidated revenues were up at ₹67,056 crores as against ₹61,510 crores for the corresponding quarter last year.

Exceptional items for the quarter includes further recoveries of ₹478 crores (£50 million) on account of the Tianjin incident which happened during the year ended March 31, 2016.

After the exceptional items, the Consolidated Profit before tax for the quarter was ₹2,551 crores, against ₹6,974 crores for the corresponding quarter last year.

JLR PERFORMANCE

Jaguar Land Rover wholesales and retails (both excluding China JV) for the quarter were 120,776 units and 118,704 units respectively.

China JV wholesales and retails for the quarter were 13,558 units and 14,059 units. Overall Retail sales were up in all regions reflecting strong sales of the Discovery Sport, XE and the new F-PACE – North America up 17%, UK up 18%, China up 19%, Europe up 16% and Overseas markets up 6%.

Revenues for the quarter ended June 30, 2016 were £5,461 million, compared to £5,002 million for the corresponding quarter last year. Operating profit (EBITDA) for the quarter was £672 million (margin at 12.3%), compared to £821 million for the corresponding quarter last year.

“The operating performance in the quarter reflects the overall higher wholesales, offset by adverse FX impact of £207 million including revaluation of £84 million, mainly EUR payables resulting from depreciation in the Pound following the BREXIT vote. EBITDA margin excluding the FX revaluation was around 14%. Further, the operating profit for the quarter was also impacted by lower local market incentive as compared to the corresponding quarter of the last year,” the company said.

Exceptional income during the quarter includes further recoveries of £50 million pertaining to Tianjin Port incident which happened during the year ended March 31, 2016.
Profit before tax was £399 million for the quarter ended June 30, 2016 compared to £638 million in the corresponding quarter last year due to lower operating profit as explained above, higher depreciation and amortization partly offset by higher China JV profitability. Share of China JV profit in Q1 FY 17 was £45 million.

Profit after Tax was £304 million for the quarter ended June 30, 2016 compared to Profit after tax of £492 million in the corresponding quarter last year.

INDIAN OPERATIONS

During the quarter, all the segments of the Company witnessed growth – M&HCV grew by 7.8% Y-o-Y, LCV segment grew by 11.6% Y-o-Y, Passenger vehicles segment grew by 6.3 % Y-o-Y with Car segment growth of 15.1 % Y-o-Y on the back of strong response to the recently launched Tiago.

The strong growth in all the segments along with ongoing cost reduction and other margin improvement initiatives, led to the improvement of 60 bps Y-o-Y in the EBITDA margin of the Standalone business (including Joint Operations) and 100 bps Y-o-Y in the EBITDA margin of the Standalone business.

The sales (including exports) of commercial and passenger vehicles for the quarter ended June 30, 2016, stood at 126,839 units, representing a growth of 8.0%, as compared to the corresponding quarter last year. The revenues of the Standalone business (including Joint Operations) for the quarter ended June 30, 2016 stood at ₹11,465 crores, as compared to ₹10,400 crores for the corresponding quarter last year. Operating profit (EBITDA) of the Standalone business (including Joint Operations) for the quarter stood at ₹690 crores with EBITDA margin at 6.6% (margin calculated on revenue net of excise duty). Other Income for the quarter included dividend from subsidiaries of ₹568 crores (dividend from subsidiaries of ₹481 crores in the corresponding quarter last year).

Profit before and after tax for the quarter ended June 30, 2016 for the Standalone business (including Joint Operations) was ₹38 crores and ₹26 crores, respectively, against Profit before and after tax of ₹332 crores and ₹290 crores, respectively, for the corresponding quarter last year.

The revenues of the Standalone business for the quarter ended June 30, 2016 stood at ₹11,276 crores, as compared to ₹10,272 crores for the corresponding quarter last year. Operating profit (EBITDA) of the Standalone business for the quarter stood at ₹588 crores with operating margin at 5.7% (margin calculated on revenue net of excise duty). Profit before and after tax for the quarter ended June 30, 2016 for the Standalone business was ₹17 crores and ₹15 crores, respectively, against Profit before and after tax of ₹212 crores and ₹203 crores, respectively, for the corresponding quarter last year. Profit before tax in the corresponding quarter last year included additional Other Income (sale of investments) of ₹324 crores.

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