Tata Motors FY09 net shrinks 51% on lower vehicle sales

Tata Motors reported a 50.7 per cent decline in net profit to Rs 1,001.26 crore for the year ended March 31, 2009 on a 10.7 per cent decline in net revenues as sales of commerical vehicles were hit by the credit crunch, higher interest rates and the economic downturn.

The company had a net profit of Rs 2,028.92 crore in the previous financial year, Tata Motors said in a statement.

The demand contraction was triggered by high interest rates and unavailability of finance throughout the year, particularly in the October-December quarter post the global financial market upheavals. The impact on heavy commercial vehicles was more severe, abetted by reduction in freight movement in different segments and customer concerns on economic conditions.

Small commercial vehicles, such as the Tata Ace and the Tata Magic, have continued to improve penetration. Stimulus packages from the government in the last quarter of the year have to an extent helped regenerate overall sales, as in the automobile industry, but growth is yet to revive to earlier levels.

The fall in volumes combined with peak input prices and high interest rates brought margins under pressure. The company accelerated cost reduction measures and proactively managed working capital to contain the impact as best as it could.

The total 2008-09 sales volume (including exports) is 5,06,421 units, as compared to 5,85,649 units in the previous year. The company retained its domestic leadership position in commercial vehicles, and continued to be among the top three in passenger vehicles.

Domestic commercial vehicle sales for the year 2008-09 amounted to 2,65,373 units, as compared to 3,12,935 units in 2007-08. The company increased market share in commercial vehicles to 63.8 per cent as against 62.2 per cent in 2007-08, aided by its wide product offering. Domestic passenger vehicles sales amounted to 207,512 units (2007-08: 2,18,055 units).

The launch of the second generation Tata Indica Vista and the continuing good run of the Tata Indigo CS has helped recover market share in passenger vehicles in the second half which stands at 13.1 per cent for the year (2007-08: 14 per cent) and a March exit share of 14.5 per cent. Tata Motors’ exports were 33,536 numbers (2007-08: 54,659 numbers), impacted by the worldwide downturn in the industry.

The launch of the Tata Indica Vista was augmented by the distribution of the Fiat 500 and Linea, both of which have been received well. In commercial vehicles, too, new products, introduced during the year or the previous year, offering benefits like higher fuel efficiency, grew at a faster rate and helped enhance market share.

The landmark events of the year were the acquisition of Jaguar Land Rover on June 2, 2008, and the launch of the Tata Nano on March 23, 2009. Over 2.03 lakh fully paid bookings were received for the Tata Nano, the deliveries of which will begin from July 2009. The Pantnagar plant began producing the Tata Nano during the year, while the Sanand plant is rapidly progressing towards completion.

The company's board has recommended a dividend of Rs 6 per ordinary share and Rs 6.50 per ‘A’ ordinary share of Rs 10 each for the financial year 2008-09 (2007-08: Rs.15 for ordinary share). The dividend is subject to approval of shareholders; tax on the dividend will be borne by the company.