L&T Q2 profit surges on one-time gains

Q2 profit rises 84.3% to Rs1,434.63 crore; revenue up 8.2% to Rs 25,010 crore

Larsen & Toubro cut about 14,000 jobs in the quarter. Photo: Mint
Larsen & Toubro cut about 14,000 jobs in the quarter. Photo: Mint

Mumbai: Larsen & Toubro Ltd, India’s largest engineering and construction company, reported on Tuesday a better-than-expected fiscal second-quarter profit and said business environment continued to remain challenging.

L&T reaffirmed its full-year fiscal 2017 forecast of 15% growth in order inflow and between 12% and 15% growth in revenue.

“Business conditions continue to remain challenging particularly for the capital goods industry and within that space, the infrastructure segment. Recognizing that the recovery is not going to be dramatic or rapid, the company has taken several initiatives to improve its efficiency parameters, its delivery capabilities, its skills and relevance with customers,” said R. Shankar Raman, chief financial officer of L&T.

He said the firm had cut about 14,000 jobs across businesses in the past six months due to factors such as change in technology, use of automation, redundancy, and performance, Raman said.

L&T has in recent years been hurt by a slowdown in the investment cycle as over-extended corporate entities struggle to repay debt, putting expansion plans on hold. But it has set a target of doubling revenue by 2021 as part of its five-year Lakshya plan.

L&T said it won orders worth Rs31,119 crore in the quarter ended 30 September, up 11% from a year earlier. International orders at Rs7,386 crore made up 24% of the total order inflow. It won major orders from the infrastructure and hydrocarbon sectors.

L&T’s consolidated order book stood at Rs2.52 trillion as of 30 September, an increase of 4% from a year earlier, with international orders constituting 29% of the total.

A major defence guns package order was expected in the second quarter but is now likely to come in the second half of the fiscal, said S.N. Subrahmanyan, deputy managing director and president, L&T.

The government’s demonetization initiative will have an immediate impact on the infrastructure and construction sectors, which could last for the next two quarters, but will be positive in the long-term, he said.

L&T’s hydrocarbon business “played the swing factor as it turned around handsomely which led to revenue and Ebidta beat at the consolidated front,” broking firm ICICIdirect.com said in a note to clients. Revenue from this business rose 33% to Rs2,494 crore in the quarter.

Net profit in the quarter rose 84.3% to Rs1,434.63 crore helped by one-time gains. Revenue from operations rose 8.2% to Rs25,010.70 crore.

Nineteen analysts polled by Bloomberg had expected L&T to report profit of Rs793.90 crore while 17 analysts had expected net sales of Rs.25,275.7 crore.

Revenue in infrastructure, its largest business, rose to Rs11,332 crore, but progress of projects under execution were hurt, L&T said. Revenue in power business rose about 30% to Rs.1745 crore. Revenue in heavy engineering rose 24% while that in IT and technology services and financial services rose 9% and 13%, respectively. Revenue in electrical and automation and developmental projects business, however, fell.

“Other income on a consolidated basis, grew handsomely on account of robust profits from treasury operations and also one of account of gains of stake sale in the general insurance subsidiary to the tune of Rs402 crore,” the ICICIdirect.com note said.

Finance costs in the quarter rose 11.4% to Rs1,342.94 crore while employee benefit expenses rose 3% to Rs3,436.50 crore. Total expenses rose 7.7% to Rs23,173.16 crore.

“On the international front, the company continues to strengthen its position and pursue select prospects in the core infrastructure and energy sector,” L&T said in a statement.

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