Mumbai: India’s biggest engineering and construction firm Larsen and Toubro Ltd (L&T) on Thursday said first quarter (Q1) profit more than tripled after it sold stake in a cement maker. Profit rose to Rs1,598 crore in the three months ended June from Rs502 crore a year ago, Mumbai-based L&T said in a statement. Sales rose 7% to Rs7,363 crore.
Profit would have risen 15% to Rs578 crore without the Rs1,020 crore earned from selling the 11.49% stake in UltraTech Cement Ltd in June, L&T executive vice-president R. Shankar Raman said on Thursday. The median estimate of five analysts in a Bloomberg survey was Rs572 crore.
The global recession and the ensuing credit crunch prompted companies and governments to extend deadlines for completing projects, including power plants, highways and refineries. Full-year sales may rise 15-20%, about half the pace of the previous year, Raman said, reiterating chief financial officer Y.M. Deosthalee’s 30 June forecast.
L&T shares, which have risen 78% this year, fell as much as 3.65% to Rs1,378 on the Bombay Stock Exchange on Thursday. The benchmark Sensex ended flat at 14,250.25.
Orders in Q1 fell 22% from a year earlier to Rs9,570 crore, mainly because of fewer overseas contracts and L&T is facing a similar slowdown in the current quarter, Raman said. Interest costs more than doubled last quarter, he said.
L&T maintains its order growth target of 25% this year, because of an expected revival in the second half, Raman said, reiterating Deosthalee’s forecast. The company expects orders for oil and gas, railway, and airport projects, Deosthalee had said last month.
The pace of new orders is expected to pick up this year as Prime Minister Manmohan Singh’s administration, which returned to power on 16 May without the help of Communist allies, boosts investments in public works, Deosthalee had said in June. The government is expected to shortly invite bids for 20 road projects, he added.
Shares of infrastructure companies such as L&T have gained since 18 May on optimism the government’s spending plan will boost earnings. The government has allocated Rs1.79 trillion in the budget year ending 31 March to build networks of roads, telephones, electricity and irrigation.
L&T expects to win orders of as much as Rs4,000 crore from the railways, including construction of the monorail project in Mumbai. Contracts for oil and power projects are also picking up in West Asia as crude prices recover, Deosthalee said. L&T expects overseas orders to contribute a quarter of total revenue in the medium term, up from 21% in the quarter ended 30 June, Raman said