Tata Motors stock tanks over 9% after co reports 96% drop in Q3 net
Despite red-marks all over the business, Managing Director and Chief Executive Guenter Butschek sounded bullish about the future of the company and described Q3 as 'very good show', citing the revival of the its struggling passenger carbusiness which has outgrown the industry by three times.
A day after Tata Motors posted disappointing earnings numbers for the third quarter ended 31 December, 2016, investors hammered the counter at will leading to an over 9 percent drop in share price in early Wednesday trade.
At 10.30 am, Tata Motors share price was trading at Rs 447.90, down 8 percent from previous close. A short while ago, the stock had plummetted to a low of Rs 441.25, down 9.3 percent, with more than 13 lakh shares changing hands on BSE.
According to a report in Moneycontrol, several foreign brokerages such as JP Morgan, Credit Suisse, CLSA have downgraded Tata Motors stock post the results citing challenges in the company's domestic and international business in the near term.
An over Rs 710-crore insurance claim for the 2015 Chinese shipyard blast helped Tata Motors remain profitable marginally in the December quarter as its bleeding domestic business reported a 10-fold jump in losses, yanking down group profit by a huge 96.22 percent at Rs 111.6 crore.
The country's largest auto company and the second best profit centre for the Tata Group had posted a net profit of Rs 2,952.67 crore in the December 2015 quarter. The bottomline was also dragged down by near 500 bps dip in margins at its British cash-cow Jaguar Land Rover (JLR), which narrowed its profit by a hefty 62 percent at 167 million pounds from 440 million pounds a year ago, Group Chief Financial Officer C Ramakrishnan told reporters.
Despite red-marks all over the business, Managing Director and Chief Executive Guenter Butschek sounded bullish about the future of the company and described Q3 as "very good show", citing the revival of the its struggling passenger car business which has outgrown the industry by three times.
"We are on track with the best-ever product portfolio, which helped us do exceptionally well. We grew three times faster than the industry despite strong headwinds from noteban. We will remain agile and be faster to market going forward," Butschek, who has completed one year in office, told reporters.
The company received payback worth 85 million pounds (over Rs 710 crore) from Chinese insurance companies for the Janjin blasts in 2015 which led to a loss of over 240 million pounds of inventory, Ramakrishnan said. In the same quarter last year, this was only 30 million pounds, he said, adding the company has only 20 million pounds to be recovered.
Despite a massive improvement in its passenger vehicles business, the parent reported a 10-fold spike in net loss at Rs 1,046 crore in the third quarter from Rs 137 crore net loss a year ago. The gains in PV segment were frittered away by de-growth in the high margin heavy vehicles business and a flat growth in LCV business.
Group sales slipped 2.2 percent to Rs 67,864.95 crore from Rs 69,398.07 crore in the year-ago period. The revenue (net of excise) of the standalone business (including joint operations) inched up to Rs 10,167 crore from Rs 10,019 crore, up 1.5 percent, while Jaguar Land Rover saw its revenue slip 13.1 percent to 6,537 million pounds from 5,781 million pounds. But the impact on bottomline was much harder as JLR net plunged 62 percent to 167 million pounds from 440 million a year ago.
Tata Motors stock got hammered in the market, falling over 8 percent in intra-day trade before recovering some ground and closing down 3.6 percent at Rs 486.80.
Ramakrishnan attributed the poor show by JLR to a slew of events such as hedging losses on forex and commodities positions, new wage settlement provisions, higher advertising spends and some product mismatch - it discontinued the old Discovery and launched the new one - which all shaved of its margins by 490 bps to 8.9 percent from 14.4 percent.
"The company also had lower wholesale volumes and less favourable product mix but was partially offset by favourable market mix, including the run out of Discovery. "There were also unfavourable variable marketing expense and higher new model launch costs and biennial pay negotiation settlement. Favourable operating exchange was also offset by realised hedges," he added.
While JLR's total retail sales rose 8.5 percent to 1,49,288 units, including in China, the JV there turned in a profit of 35 million pounds. Retail sales were driven by the strong demand for Jaguar F-Pace, Jaguar XF and Land Rover Discovery Sport and the new long wheelbase Jaguar XFL. JLR, which nets over 80 percent sales outside the home market of Britain, saw Chinese sales jump 38.4 percent, North America (up 19.8 percent) and Europe (up 7 percent) led by strong sales.
Ramakrishnan said JLR spent 920 million in capex during the quarter alone which is part of the over 3.75 billion pounds planned annual capex.
The China JV reported a profit of 35 million pounds, up from 22 million pounds. The company recovered 85 million pounds from the Tianjin harbour blasts in the middle of 2015 compared to 30 million pounds a year ago.
On the domestic side, Tata Motors said during Q3, its commercial vehicles segment witnessed demand shrinkage due to demonetisation, while PV sales jumped over 31 percent. Medium and heavy commercial vehicle segment witnessed major pressure with a fall of 9 percent and LCV segment was overall flat. Passenger vehicles segment grew by 25.4 percent with car segment rising by 31.1 percent on the back of continued strong response to the Tiago, while exports grew by 34.6 percent. Total sales rose 7.5 percent to 1,32,572 units.
Its Korean arm Tata Daewoo Commercial Vehicles reported a revenue of Rs 1,603 crore and a net profit of Rs 90 crore. Tata Motors finance sales grew to Rs 688 crore but reported a loss Rs 3 crore.
With PTI inputs
Why the Tata Punch’s five-star GNCAP rating was a steeper target: In conversation with TaMo’s Anand Kulkarni
Anand Kulkarni, VP – Product Line Head (ALFA) at Tata Motors, talks about the Punch’s Global NCAP performance, prepping for crash tests and the evolution of vehicular safety.
The Tata Punch will soon be India's most affordable vehicle to receive a full five stars in Global NCAP crash tests; mini-SUV to be launched on 18 October.
While Hero MotoCorp’s dispatches were down 32 percent, Royal Enfield’s wholesales were down by a whopping 62 percent; revival in demand blunted by chip shortage.