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Tata Motors profits surge, but input costs a worry

Tata Motors profits surge, but input costs a worry

Tata Motors Ltd. said Friday that its stand-alone operations posted a $86.6 million profit in the final quarter of 2009 from a year-ago loss, but India's largest commercial vehicle maker missed expectations as rising commodity and employee costs eroded margins.
Net profit for the quarter ending Dec. 31 was 4.0 billion rupees ($86.6 million), up from a loss of 2.6 billion rupees in the same period of 2008, when India began to feel the brunt of the Great Recession.
Revenues surged 88.7 percent, to 89.8 billion rupees ($1.9 billion) from the year-ago period, as government stimulus measures and India's industrial revival stoked sales.
Compared to the previous quarter, sales grew 12.5 percent, while net profit fell 45.1 percent.
Tata Motors raised prices in October and again in January, but those increases did not fully offset higher input costs, executives said.
"We have to see what the market will bear," India managing director Prakash M. Telang told reporters. "Clearly there are concerns."
The company said the cost of raw materials and components rose 67.7 percent from a year earlier, to 49.8 billion rupees ($1.1 billion). Employee costs were up 27.4 percent, to 4.7 billion ($102.3 million), which executives said was mainly because of hiring.
In January, Tata Motors raised the price of commercial vehicles by an average of 1 percent and of passenger vehicles by 1,500 rupees to 3,500 rupees ($32.5-$75.8), said chief financial officer C. Ramakrishnan.
Ramakrishnan also said rising interest rates and a withdrawal of government stimulus measures could present challenges going forward.
In the wake of the crisis, the government bought buses, cut taxes, changed accounting rules and slashed interest rates, all of which spurred vehicle sales.
The central bank on Friday made its first meaningful policy reversal, raising cash reserve requirements by 0.75 percentage points, and said interest rate hikes would follow.
HDFC Securities analyst V.K. Sharma said Tata Motors missed a consensus net profit forecast of 4.8 billion rupees.
"The markets are not exactly going to be cheerful," he said. "People were building in higher margins which have not happened."
The stand-alone results for Tata Motors do not include the performance of its struggling Jaguar and Land Rover subsidiaries.
Executives said the 15 billion rupee ($324.7 million) dedicated Nano plant in Sanand, Gujarat, should be fully operational within the next few months, churning out 250,000 of the ultracheap cars a year. So far, 17,537 have been delivered.
The company, which has been on a deleveraging drive, said its debt-to-equity ratio fell to 1.44 from 1.6 during the quarter and stand-alone debt was 200 billion rupees ($4.3 billion).


Updated : 2021-06-17 14:52 GMT+08:00