Graeme Brown, Birmingham Post, 1st June, 2009
Tata Motors has seen its annual profits more than halve because of falling demand for cars and trucks – but said there were brighter signs on the horizon for the industry.
Jaguar Land Rover’s parent firm made after-tax profits of £133million in the year to the end of March, compared with £267m a year earlier.
The company, India’s largest vehicle-maker, said a severely diminished demand for cars and an even worse commercial vehicle market had hit hard. However, the profits fall had been less than analysts feared and the company said it expects an improvement in business towards the end of the year.
Meanwhile, the Mumbai-based firm announced that Managing Director Ravi Kant will retire from his position today but a spokesman said he will continue on JLR’s board. Tata said sales of the world’s cheapest car, the Nano, which it launched last month, had been “fairly satisfying” despite turning over a total of £3.4bn last year, which represents a 10.7 per cent fall.
A company spokesman said, in a trading statement: “The fall in volumes, combined with peak input prices and high interest rates, brought margins under pressure. The company proactively managed working capital and accelerated cost-reduction measures to contain the impact as best as it could.”
The fall in volumes, combined with peak input prices and high interest rates, brought margins under pressure. The company proactively managed working capital and accelerated cost-reduction measures to contain the impact as best as it could.” Tata Motors Limited’s spokesman
Tata said the reduced demand was triggered by high interest rates and unavailability of finance throughout the year, particularly between October and December after global financial market upheavals. The company said the impact was felt most severely in the heavy commercial market, amid a reduction in freight movement. The company sold 506,421 vehicles across the year, compared to 585,649 units in the previous 12 months.
Tata, which announced last week it had refinanced the £1.85bn bridging loan it took out to buy JLR, said the company remains the market leader in the commercial vehicles sector and among the top three in passenger vehicles in its domestic market, despite the slump.
Domestic commercial vehicle sales amounted to 265,373 units, a 63.8 per cent market share, while the 207,512 passenger cars the firm sold accounted for 13.1 per cent of the Indian market. However, Chief Financial Officer C Ramakrishnan said: “Once the industrial activity picks up, there will also be a revival in demand for medium and heavy trucks.” He added that the company, which has £1.6bn of debt on its books, planned to raise further capital soon.
Tata’s results are closely linked to the plight of India’s economy, which grew 6.7 per cent last year, a six-year low, but analysts are predicting a recovery from the second half of this fiscal year.
Surjit Arora, Automotive Industry Analyst with Prabhudas Lilladher, said: “If you adjust for exceptional items, the figures are in line with market expectations. The June quarter should have more surprises in store with figures for Jaguar-Land Rover.”
[Source: Birmingham Post]
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