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Tata Motors posts surprise profit jump on Jaguar Land Rover one-time gain

British luxury unit helped offset a loss in its Indian operations

NEW DELHI (NewsRise) -- Tata Motors Ltd., the owner of Jaguar Land Rover, reported a surprise 42% jump in consolidated quarterly net profit after a one-time gain at its British luxury unit helped offset a loss in its Indian operations.

The Mumbai-based auto maker posted a net profit of 32 billion rupees ($501 million) in the quarter ended June 30, up from 22.6 billion rupees a year earlier. A Thomson Reuters poll of analysts had forecast a profit of 15.39 billion rupees.

Revenue fell 10% to 586.51 billion rupees in the period amid weaker demand for Tata's commercial vehicles at home, as well as lower factory dispatches of JLR vehicles in all markets, excluding China.

"While the first-quarter results have not met our expectations, we are working with renewed focus and energy to improve performance of our commercial and passenger vehicle businesses," Guenter Butschek, the auto maker's managing director and chief executive, said in a statement. The company's "focus on topline, market share growth, major cost reduction initiatives and efficiency improvements have been significantly enhanced and accelerated in the last few months" and would significantly boost its financials in the coming quarters.

Jaguar Land Rover had a one-time gain of 36.09 billion rupees in the quarter due to recent changes made to its pension plans. Its wholesale vehicle dispatches, excluding China, fell 2.4% on-year to 117,916 units in the quarter, although global retail sales rose 3.5% to 137,463 units buoyed by robust demand in China.

JLR, which contributes the bulk of earnings at Tata Motors, had a 55% surge in net profit during the April-June period at 472 million pounds ($613 million) thanks to the one-time gain. Revenue increased 4.6% to about 5.6 billion pounds. However, its earnings before interest, tax, depreciation and amortization margin slipped to 7.9% last quarter, from 12.5% a year earlier.

Retail sales in China, JLR's single-largest market, climbed 30% while North America saw a 16% increase. However, sales in Europe remained little changed and U.K. saw demand falling 14% in the quarter, which the company attributed to a vehicle excise tax introduced in April.

Increasing sales in China is crucial for JLR as it is the single-largest as well as the most profitable market for the luxury brands. The auto maker-which has set a capital expenditure of about 4 billion pounds to 4.35 billion pounds this fiscal year-also needs to introduce more models to accelerate sales and challenge its bigger German rivals BMW, Mercedes-Benz and Audi.

JLR is investing in a new factory in Slovakia while undertaking contract manufacturing in Austria to boost volumes as it seeks to accelerate sales worldwide.

In presentation to investors, JLR said it expects margin pressures witnessed in the last fiscal year to continue this year as well including "higher incentive levels and launch and growth costs."

In India, Tata Motors posted a net loss of 4.67 billion rupees, compared with a year-earlier profit of 260 million rupees. Revenue fell 11% to 92.07 billion rupees.

In July, Butschek appealed to employees to shore up their performance, saying the company was facing a "crisis situation" amid rising competition in the Indian commercial vehicle market. Tata Motors ceded market share to newer rivals such as Daimler and Volvo who have stepped up investments in truck and bus manufacturing facilities in the country in recent years. Tata Motors also saw a churn in senior leadership, even as it let go several of its senior managers amid efforts to cut costs.

Tata Motors sold a total of 111,860 vehicles last quarter, a decline of 12%. While sales of bigger trucks and buses slumped 35%, cars and sport-utility vehicle sales rose a modest 4.7%.

Shares of Tata Motors fell 3.2% in Mumbai trading before the earnings were released. The benchmark BSE Sensex stock index declined 0.7% on Wednesday.

--By Santanu Choudhury

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