Tata Motors slides to a loss on China woes

By Tommy Wilkes and Aditi Shah

NEW DELHI (Reuters) - Tata Motors Ltd posted a surprise 4.3 billion rupee ($65.4 million) net loss in the quarter to the end of September after sales in China fell and a port explosion damaged thousands of vehicles.

Tata said on Friday that sales of its Jaguar Land Rover (JLR) cars in China, which have long propped up profits, started rising again in October after several months of declines though a squeeze on margins had hurt profitability.

China was once Tata's fastest growing market but it has struggled with sluggish demand in the last few years. Sales fell 32 percent in the July to September quarter as an economic slowdown hit the world's biggest car market.

JLR's pretax profit of 88 million pounds in the quarter was down from 609 million pounds a year earlier, Tata said.

"As we exited the quarter in September, as well as in October, including China, the wholesale performance and the acceptance of the new products is very strong," Chief Financial Officer Chandrasekaran Ramakrishnan told reporters.

"It gives us a great confidence to look at (the second half) in terms of the business and financial performance."

Tata said it had booked a 24.93 billion rupee charge at the group level after a chemical blast in the Chinese port of Tianjin in August destroyed or damaged thousands of JLR vehicles.

Phillip Capital analysts said margins at JLR fell to 12.2 percent, a multi-year low and under its 14.9 percent estimate.

"Overall the stark compression in margins at JLR spooked us as well as street ... outlook on margins to be very critical for us to form a concrete view on the stock," they said.

Tata said consolidated profit before tax and exceptional items slid to 15.4 billion rupees from 56.4 billion a year ago, reflecting the weaker sales in China and foreign exchange moves.

However, the company said a stronger performance in Europe and North America helped offset weaker sales in China and other emerging markets. Net sales during the quarter rose to 608.53 billion rupees from 601.64 billion a year earlier.

Analysts on average had expected Tata to report a net profit of 21.36 billion rupees, according to Thomson Reuters data, down from 32.9 billion rupees a year earlier.

Shares in Tata, which have fallen by close to a fifth this year, closed down 1.9 percent on Friday underperforming a flat Mumbai market.

($1 = 65.7800 rupees)

(Editing by Mark Potter and David Clarke)