TaMo’s 3X profit rise signals turnaround

Launch of new products and production revamp clubbed with cost reduction has helped Tata Motors post three-fold jump in its consolidated profit for the July-September quarter to Rs 2,502 crore as against Rs 848 crore reported during the same period last year.

Guenter Butschek, managing director and chief executive, Tata Motors, said the ‘turn-around’ plan of the company has begun showing positive results as it has achieved highest sales in the passenger vehicles (PV) since November 2012 and commercial vehicles (CV) since June 2014.

The development comes a few months after the chairman of Tata Group N Chandrasekaran raising serious concerns in the company’s annual report in July on the continuous decline of CV and PV sales.

Tata Motors’s market share in CV segment had fallen to 44.4% from a high of 59.4% in 2011-12. Chandrasekaran had blamed it on the overall delay in new product launches, lack of adequate responsiveness to the competitive environment and an unsustainable cost structure.

“We have tried filling those ‘white spaces’ by bringing out new products and redressing some of our own shortcomings that were there earlier,” said Guenter.

The company in a statement said it reported consolidated revenue (net of excise) of Rs 70,156 crore in the second quarter as against Rs 63,577 crore in the year-ago period.

Consolidated profit before tax was Rs 3,081 crore against Rs 999 crore for the corresponding quarter last year and consolidated profit after tax (post profit/loss in respect of joint ventures and associated companies) stood at Rs 2,502 crore against Rs 848 a year ago.

While making a presentation on the sales performance of the company, Guenter said sales (including exports) of commercial and passenger vehicles stood at 152,979 units in the second quarter, a growth of 13.8%.

The company clocked 28% growth in medium and heavy commercial vehicles. (MHCVs).

The company clocked 35% growth in light commercial vehicles (LCVs), 38% in small commercial vehicles (SCVs) and pick-ups.

The passenger vehicles grew 14.4% year-on-year.

Girish Wagh, head - commercial vehicle division, said the CV business market share grew 1.7% (year-on-year) and 3.9% (quarter-on-quarter) on the back of newly-launched products, increased acceptance of selective catalytic reduction (SCR) technology, improved stakeholders’ engagement and aggressive market activation.

Government funding in infrastructure development and restrictions on overloading with a higher demand for high-tonnage vehicles also helped to push the sales.

The renewed government spending in infrastructure projects would help in pushing the sales for tipper vehicles while the completion of the project would give rise to demand for other kinds of vehicles,  Wagh added.

The company executives said the production had to be revamped by about 70% to meet the demand, mainly in the CV segment.

Further, Tata Motors’s subsidiary Jaguar Land Rover Automotive Plc (JLR) on a standalone reported a 38% increase in second-quarter pre-tax profits to £385 million in the three months ended on September 30, 2017. Revenues were up 11.5% to £6.3 billion with an increase in margin (earnings before interest and taxes) of 1% to 5.2%.

Ralf Speth, CEO of JLR, said, “JLR’s investment spending was more than £1 billion in the second quarter. Investment spending for the full year is expected to exceed £4 billion.”