Tata Motors, India's biggest truck and bus maker, posted a 12% rise in quarterly profit that fell below expectations, as margins at its key Jaguar Land Rover (JLR) unit fell and profit at its domestic business nearly halved.
JLR, which Tata bought for $2.3 billion in 2008, has been the automaker's main profit driver in recent quarters, as strong demand for Jaguar luxury saloons and sporty Land Rover cars, particularly from China and Russia, offset slowing sales of Tata's own-branded cars and trucks in India due to the impact of cooling economic growth and high interest rates.
But slowing growth in China now and struggling economies in Europe due to the euro zone debt crisis are dampening profitability at JLR. A drop in margins in the previous quarter sparked a 12% one-day drop in Tata Motors' share price.
Like some rivals, Tata Motors too was forced to shut down two of its factories, for two three-day periods in June in order to balance production with demand.
Tata, part of the $83 billion Tata Group conglomerate, said net profit for the quarter ended in June was 22.45 billion rupees, up 12.3% from a year previously, with revenue up 30.1% at 433.2 billion rupees.
Analysts, on average, expected net profit of 27.61 billion rupees on revenue of 429.40 billion rupees, according to Thomson Reuters I/B/E/S.
The operating margin at the British luxury brands unit stood at 14.5%, compared to 15.1% in the same period last year and 14.6% in the previous quarter.
The company said profit in the quarter was also impacted by foreign exchange loss.
JLR sold 83,452 vehicles during the quarter, 34.4% more than in the previous year. China accounted for 22.2% of the total volume in the quarter, up from 15.7% in the same period last year.
Tata Motors vehicle sales fell 3.6% to 190,483, the company said. The India business profit nearly halved to 2.1 billion rupees.
Shares in Tata Motors were down as much as 4% after the results, but later recouped some of its losses to end the day down nearly 1%.
India reported on Thursday its industrial output fell for the third time in four months in June, putting pressure on the government to pull Asia's third-largest economy from its worst slowdown in almost a decade.
An Indian automobile industry body last month lowered the forecast for car sales growth for the current fiscal year to rise 9-11%, compared to the 10-12% growth it had forecast in April.