Key divisions drive L&T profit; firm banks on Q4 order flow

Key divisions drive L&T profit; firm banks on Q4 order flow

Mumbai: Beating analyst estimates, Larsen and Toubro Ltd (L&T) posted a 10.76% increase in net profit to Rs840.53 crore in the three months to 31 December from a year earlier, driven by its core engineering and construction segment.

Director and chief financial officer Y.M. Deosthalee, however, said new orders in the December quarter were 24% lower, and the company would have to rely on orders in the March quarter to achieve its annual target.

L&T fell 1.65% to Rs1,681.15 on the Bombay Stock Exchange, while the benchmark index, the Sensex, gained 0.12% to close at 18,882.25 points.

The revenue of India’s largest engineering and construction company rose 40% to Rs11,418 crore in the December quarter—higher than a 25-analyst estimate of Rs10,038.15 crore, reported by Bloomberg. The engineering and construction segment grew 45% to Rs9,831 crore.

Profit could have been higher but for high raw material costs, sub-contracting charges and other operating expenses, L&T said.

The company added orders worth Rs13,366 during the quarter, taking the total order book at the end of December to Rs1,14,882 crore. “There are substantial orders lined up in March, but things can get shifted by one month or two months," Deosthalee said.

“The execution of several power projects also progressed well during the quarter. With efficient execution and close monitoring of projects, the segment is well positioned to achieve its revenue growth targets for the financial year," the company said in a media release.

L&T had forecast a 20% growth in sales for the year to March.

Operating profit margin for the December quarter stood at 11.4%, but Deosthalee warned it may drop for the year. “There has been an impact of inflation and higher commodity prices on segments like electricals," he said, pointing out that the price of copper, a crucial input in this segment, has increased by 30%.

The electrical and electronics segment recorded an 11% increase in sales to Rs759 crore during the December quarter.

The margin for the engineering and construction segment improved to 12.5% for the first nine months of the year, compared with 12.2% a year earlier, the company said.

“There are no surprises in the performance of L&T, though it beat the forecast," said an analyst with a domestic brokerage. He did not want to be identified.