Tata Motors Shares Decline After Profit Misses Estimates
Tata Motors Ltd. (TTMT), the Indian owner of Jaguar Land Rover, fell for a second day in Mumbai trading as slowing demand for luxury vehicles in Europe led the company to report profit that missed analysts’ estimates.
Tata dropped 1.8 percent to 235.10 rupees at 9:47 a.m. in Mumbai, while the benchmark BSE Sensitive Index declined 0.2 percent. The company yesterday reported net income rose 12 percent to 22.45 billion rupees ($406 million), missing the 27.3 billion-rupee median of 35 analyst estimates compiled by Bloomberg. Profit at the Jaguar Land Rover unit was also below analysts’ estimates.
Credit Suisse Group AG cut its rating on the stock, citing concerns the British luxury-vehicle unit faces pressure to lower prices in markets including China. Jaguar Land Rover Chief Executive Officer Ralf Speth is facing pressure to revamp Jaguar’s aging designs and increase Land Rover’s appeal beyond the hit-model Evoque after sales growth slowed last quarter.
“Demand is clearly slowing for JLR on uncertainty in Europe,” said Basudeb Banerjee, an analyst with Quant Broking Pvt in Mumbai. “The next quarter too may be lackluster and the third quarter will be crucial.”
Sales at the Jaguar Land Rover unit rose 34 percent to 83,452 vehicles last quarter, slowing from a 48 percent increase in the preceding quarter.
Tata Motors sales increased 29 percent to 431.7 billion rupees. The company suffered a one-time loss on foreign exchange of 4.4 billion rupees, it said. The rupee weakened 8.6 percent against the dollar in the quarter to June 30.
Revenue of its unit, based in Gaydon-England, rose 34.6 percent to 3.64 billion pounds, the company said. The unit’s operating margin declined to 14.5 percent from 15.1 percent in the year-earlier quarter.
“We expect to maintain these margins going forward, but there remain challenges,” Speth said at a press conference in Mumbai yesterday. “Nobody can predict what’s going to happen with the economy in Europe. We are cautious.”
In June, Jaguar’s sales declined for the first time in seven months, and deliveries of Land Rover sport utility vehicles -- excluding the sold-out Evoque -- dropped for a third month, according to CLSA Asia-Pacific Markets.
$12 Billion Investment
Tata Motors’ has said it intends to invest $12 billion in in its British unit over five years and is preparing to unveil Jaguar’s first two-seat sports car in almost four decades. The automaker has also said it will form a joint venture with China’s Chery Automobile Co. to build Jaguar Land Rover vehicles for the world’s largest auto market.
In the quarter, share of the U.K. in the unit’s total sales declined to 15.5 percent from 19.4 percent in the year-earlier period. North America accounted for 17.7 percent from 21 percent, while China contributed 22.2 percent from 15.7 percent, the company said. Sales in China rose 91 percent, it said.
Tata Motors said in May it would spend 2 billion pounds this year in capital expenditure to expand, including introduction of 40 new or upgraded vehicle models over the next five years.
The venture, to be based in the eastern city of Changshu, in Jiangsu province, will have a production capacity of 130,000 vehicles annually, according to a statement posted on China’s Ministry of Environmental Protection’s website.
The joint venture is awaiting approval from China’s National Development and Reform Commission, and will take two years to build the factory once it gets the permission, Speth said.
“We have a very, very low market share in China and therefore assume we can continue this growth,” said Speth. “We assume the Chinese markets will grow further.”
Profit of Tata Motors, excluding units, declined 49 percent to 2.05 billion rupees as slowing economic growth in India and intensifying competition led to a decline in sales of its passenger vehicles and heavy trucks.
There will be continued pressure on sales of medium and heavy trucks as well as passenger vehicles in India, Chief Financial Officer C. Ramakrishnan said.
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