Tata Motors Q1 net dips 30% on input costs and forex losses

Earning woes continue for the four-wheeler companies on the back of sluggish domestic market and high input costs. After Maruti and Mahindra, Tata Motors, India’s biggest automaker, on Wednesday reported a 30% drop in first quarter net profit as high raw material costs and foreign exchange losses dented earnings.
The company, that saw a low single-digit growth in sales volume in the period, said net profit in the April-June’08 quarter fell to Rs 326.1 crore from Rs 466.7 crore in the same period last fiscal, pulled down by “adverse extraneous factors.” “The profits for the quarter include a notional valuation loss of Rs 199.88 crore (compared to a gain of Rs 205.89 crore in the corresponding quarter last year) reflecting the volatility in foreign exchange rates impacting the company’s long-term funds raised through issue of Foreign Currency Convertible instruments,” Tata Motors said, while announcing the results in Mumbai. The rupee fell 6.8% against the dollar in the quarter after rising more than 12% in 2007. Tata Motors also said profit margins were further impacted in a challenging environment due to “abnormal” input material cost increases and general inflationary trends.
Importantly, the drop in profit came even as the company sold a 24% stake in its auto parts unit, Tata Auto-Comp Systems Ltd, and booked a profit of Rs 114 crore in the quarter, chief financial officer C Ramakrishnan said.
While Maruti’s first quarter net profit is down 6.7%, Mahindra saw a 16.8% drop, both impacted by high cost of inputs and exchange rate fluctuations. The company’s sales volume for the quarter (including exports) managed a 3.9% growth at 1.33 lakh units over 1.28 lakh units sold in the corresponding quarter last year.