MUMBAI: Currency fluctuation post Brexit vote and higher expenses took the shine off a sturdy performance by Tata Motors. The automaker recorded strong sales of its Jaguar saloons and Land Rovers in its key markets of the UK, China and North America in the first three months of the fiscal but profits more than halved due to negative effects of currency translation and adverse commodity derivative movements.
Profits fell 57% to Rs 2,236 crore even as sales rose 10% to Rs 66,101 crore in the June quarter of 2016-17. Tata Motors’ profit and sales in the year-ago quarter were Rs 5,231 crore and Rs 60,094 crore, respectively. Analysts, according to Reuters, had expected Tata Motors to post a profit of Rs 2,420 crore in the April-June period of fiscal 2017.
The quarter reflects higher volumes, offset by adverse foreign exchange impact of Rs 2,296 crore, mainly euro payables resulting from depreciation in pound following the Brexit vote, and adverse commodity derivatives impact of Rs 167 crore in its key Jaguar Land Rover unit, Tata Motors said in a statement.
Depreciation and amortisation expenses increased 21% to Rs 4,551 crore due to new product launches in the quarter. New models, Jaguar XE and F-Pace, boosted retail sales of its UK unit by 16%. Land Rover retail sales during the quarter exceeded 1 lakh units for the first time, the company said in a separate note. Revenues at Tata Motors’ UK arm Jaguar Land Rover, which account for two-thirds of Tata Motors revenues, grew 10% to 5.5-billion pounds.
Profit declined from 492 million pounds to 304 million pounds in the three months through June.
Why use so many derivative products ? There has to be proper hedging against foreign currency fluctuations.Manu Mitra
Tata Motors profits were also aided by a one-time gain of Rs 478 crore from an insurance claim for damages caused to its Jaguar and Land Rover cars in a chemical explosion at Tianjin Port in China last fiscal. Stripping out exceptional items and other costs, the company’s operating profit was Rs 3,062 crore versus Rs 7,489 crore a year earlier.
Tata Group’s flagship’s standalone profit fell sharply from Rs 203 crore to Rs 15 crore. It said that the first quarter of last fiscal had additional income (sale from investments) of Rs 324 crore. Revenue in the standalone business, however, increased nearly 10% to Rs 11,276 crore. Shares of Tata Motors closed at Rs 514, up 4%, on Friday in a weak Mumbai market.