India Watch : Tata Motors posts profit aided by rise in JLR volume

Automotive News Europe, 27th November, 2009

MUMBAI (Reuters)  Helped by strong volume growth from Jaguar Land Rover, Tata Motors Limited posted an unexpected consolidated profit for the September quarter.

JLR saw sales volume rise 23 percent from the previous quarter, and Tata Motors said there were signs of improved demand for other key units after a global slump in the auto sector.

“It is a surprise result. We did not expect the turnaround to happen so fast. It looks like the volume growth they had in the quarter and better pricing must have led to this,” said Surjit Arora, Auto Analyst with Prabhudas Lilladher.

New JLR products such as the upgraded Range Rover Sport and Land Rover Discovery  4 are getting a good reception and aggressive cost reduction had also paid off, Tata Motors said. “The business is witnessing some stability in the external environment with certain key markets showing signs of recovery,” it said in a statement.

JLR made an operating profit of £41.3 million in the quarter, but with debts of 90 billion rupees ($1.9 billion) it made a net loss of £60 million in Tata’s fiscal second quarter of the 2009-2010 business year.

Ahead of the results, Citi said it expected JLR to become profitable at the operating profit level by the fiscal third quarter, through cost cutting initiatives and better pricing.

Improving sales

Auto sales have been improving in India for most of this fiscal year, compared with a 1 percent rise in sales in 2008-2009. Car sales are expected to rise by double digits this year, according to industry estimates.

Tata Motors, which has about 60 percent of India’s truck and bus market, the world’s fifth-biggest, reported a consolidated profit of 217.8 million rupees ($4.7 million) for its fiscal second quarter ended September 30. In the year-ago quarter, the company posted a consolidated net loss of 9.42 billion rupees.

The company made a net loss from ordinary activities of 21.5 million, but investment returns of 196.9 million rupees and its share of minority interests pushed in to a net profit. In October, Tata Motors reported a stand-alone net profit, excluding results from JLR, of 7.29 billion rupees.

The results were released in the final minutes of trading. Shares in Tata Motors, valued at $7.3 billion, ended down 0.8 percent at 629.50 rupees in a Mumbai market that fell 1.3 percent. The shares have quadrupled in value this year, far outstripping a rise of more than 70 percent in the main index.

[Source: Automotive News Europe/Reuters]

Clive Goldthorp

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