Foreign exchange losses after Britain’s decision to leave the European Union and higher expenses offset strong sales growth at India’s Tata Motors, more than halving its net profit in the April-June quarter.
Tata Motors’ profit was hit by forex losses of Rs22.96bn ($342.43mn) mainly due to pound depreciation post-Brexit vote and adverse commodity derivatives impact of Rs1.67bn in the quarter, it said in a statement yesterday.
Chief Financial Officer C Ramakrishnan said while the company cannot predict whether the foreign exchange impact will continue, it will be cautious and closely monitor and assess market conditions in Britain and the EU. “We need to be careful...that is why we have a fairly robust hedge book so we are not subject to so much volatility,” Ramakrishnan said, adding that major events that suddenly trigger significant currency movements tend to be a surprise.
The majority of the forex loss was at its British luxury unit Jaguar Land Rover where profit after tax fell to £304mn from £492mn in the year ago quarter, despite a 9% increase in revenue thanks to strong sales of its Jaguar XE compact saloon and Discovery Sport SUV.
“The operating performance in the quarter reflects the overall higher wholesales, offset by adverse foreign exchange impact of £207mn including revaluation of £84mn, mainly euro payables resulting from depreciation in the pound following the Brexit vote,” Tata said in a statement.
As a result, operating margins at JLR fell to 12.3% during the quarter from 16.4% in the year ago quarter. Margins were also impacted by lower local market incentives earned in China this quarter compared with a year ago and a change in the product portfolio to include more high-volume-low-margin vehicles like the Jaguar XE.
Tata Motors, India’s top automaker by revenue, said consolidated net profit for the quarter fell to Rs22.36bn compared with Rs52.31bn in the year-ago quarter.
Analysts on average expected a profit of Rs24.2bn, according to Thomson Reuters data.
Total income from operations rose 9% to
Rs670.56bn.
Profit was helped by a one-time gain of Rs4.78bn in an insurance payment for damage caused to JLR cars in an explosion at Tianjin port in China last year. Shares in Tata Motors, valued at $23.7bn, ended the day 2% higher after rising as much as 4% in a weak Mumbai market.
