Tata Motors reported a stronger-than-expected 40.5% year on year rise in fiscal third quarter profit after strong sales at Jaguar Land Rover more than compensated for weakness in its home market.
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“JLR has shown improvements in volumes and margins in ways that were way beyond what the market expected,” Deven Choksey, chief executive of KR Choksey Shares & Securities, told Reuters.
Chief financial officer CR Ramakrishnan told the news agency strong sales at Jaguar Land Rover reflected a better product and market mix as well as strong demand in China and Russia, especially for the new Range Rover Evoque SUV.
Tata Motors’ consolidated net profit for the quarter rose to INR34.06bn (US$691m) from INR24.24bn a year earlier on revenue up 44% to INR452.6bn.
Analysts on average had forecast a net profit of INR26.13bn on revenue of INR416.73bn, according to Thomson Reuters I/B/E/S.
Net profit in the company’s India business dropped by more than half to INR1.74bn, partly as a result of higher commodity costs and increased spending on marketing.
“An easing of commodity prices should see improvement on margins in the near term,” Ramakrishnan told a news conference after the release of the results on Tuesday, adding that higher sales volumes would help margins in coming quarters.
Choksey, however, noted to Reuters that overall car sales in China appear to be coming down. “How the China demand moves is the only caution looking forward,” he said.
January car sales in China fell 23.8% year on year, the biggest monthly drop in more than three years.
In India, car sales are heading for their first annual fall in 10 years as high interest rates and rising fuel costs dampen demand.
“Concerns remain on the overall macroeconomic picture … which could impact commercial and passenger vehicles,” said Ramakrishnan. “But we are cautiously optimistic.”
Revenue at Jaguar Land Rover rose nearly 41% to GBP3.75bn ($5.92bn), while profit rose 57.4% to GBP440m. Profit margins at JLR were 20.1%, compared with 6.7% in the domestic business, Reuters said.
China and Russia accounted for 22.4% of JLR’s sales during the quarter, Ramakrishnan said, as total vehicle sales rose 37% to 86,322.
Tata’s planned manufacturing joint venture with an as-yet unnamed Chinese partner was “on track,” JLR chief executive Ralf Speth said, without providing details.
Tata assembles some Land Rover models in India for the local market, and this will gradually increase as growth in luxury car demand far outstrips that for overall car demand, he said.
