1. L&T net cuts order guidance to 5-7%; net profit up 15.6% at Rs 996 cr

L&T net cuts order guidance to 5-7%; net profit up 15.6% at Rs 996 cr

Larsen and Toubro (L&T), on Friday cut its order inflow guidance for the current year to 5%-7% from 15% indicated earlier, a sign of slowing capital expenditure in the economy.

By: | Mumbai | Published: October 30, 2015 8:36 PM

Larsen and Toubro (L&T), on Friday cut its order inflow guidance for the current year to 5%-7% from 15% indicated earlier, a sign of slowing capital expenditure in the economy. Consequently, the engineering heavyweight lowered its forecast for annual revenues 12% from 15% earlier. The company, a bellweather for the economy, reported a 16% year-on-year increase in consolidated net profits to Rs 1,000 crore for the quarter ended September 30, 2015, beating analysts estimates. The increase was supported by an exceptional Rs 309 crore earned from a 5% stake sale in L&T Finance Holding and a strategic exit from a vendor firm.

R Shankar Raman, chief financial officer, L&T observed the investment momentum was yet to pick up despite all efforts from various stakeholders. “In the wake of excess capacity in many industries, companies are worried about efficient utilisation rather than investing in new capacities,” Shankar Raman said.

The CFO also indicated that the high competitive intensity in certain sectors was one reason the company was staying away from new projects. “The asking rate in the market both within India and outside looks steep even by L&T standards,” he said.

SN Subrahmanyan, deputy managing director and president, L&T noted that while there was stability in government decision making and issues related to spectrum, coal block allocations and issues related to environment had been sorted,some fundamental issues crucial to development remained. Among these was the issue of land acquisition. “Many decisions have been taken and we will see traction and positivity finally, but it is going to take time,” Subramanyan said.

L&T’s fresh order inflows in the three months to September declined a sharp 28% y-o-y to Rs 28,600 crore while the inflows were down by 25% y-o-y in HIFY16. However, given the backlog, the order book stood at Rs 2.44 lakh crore, an increase of 14% y-o-y during the quarter ended September 30, 2015. The current order book gives the company revenue visibilty for the next 8-12 quarters. International orders accounted for 38% of the inflows in the July-September quarter while they constituted 28% of the order book as of September 2015.

The firm’s net sales increased 11% y-o-y to Rs 23,390 crore with contributions from infrastructure, power and services businesses. The company’s ebitda rose 11% to Rs 2590 crore but the operating margins remained flat at 11%. Analysts had estimated L&T’s net profit at Rs 975.2 crore, net sales at Rs 23,228 crore and EBIDTA at Rs 2,692 crore, according to Bloomberg.

Referring to the power sector, Shankar Raman said utilities, in the public sector, had floated tenders for which a”fair amount of competitive intensity” had been seen. “There is good amount of interest for such orders since these have come after a long time. However, the price points at which these projects are being won are extremely challenging to the cost structure. Nevertheless, it is good to be in a position to be participating in bids rather than worrying about the lack of any investment activity,” the CFO said.

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