India’s largest engineering and construction company by sales, Larsen and Toubro (L&T), whose performance is considered a benchmark for the health of the Indian economy, posted a mixed set of numbers for the quarter and year ended March 31. The company slipped on profitability and missed its revenue guidance by a whisker. However, it exceeded its growth targets for order inflows in 2014-2015.
L&T posted a decline of 27% in the consolidated net profit to R2,070 crore, on a year-on-year basis, for the quarter ended March 31, though it beat analyst estimates. For the full year ended March 31, the company posted a y-o-y fall of 2.8% at R4,760 crore in the consolidated net profit. The net sales were up 4% y-o-y to R28,020 crore during the quarter, while for the full year, the net sales were up 8% y-o-y to R92,000 crore. The international revenue during the year at R25,926 crore constituted 28% of the total revenues.
As per Bloomberg analyst estimates, L&T was expected to post a net profit of R1,856 crore during the quarter, while net sales were estimated to be R30,205.3 crore.
The company said net profit of the corresponding quarter and full year included a one-time write back of R664 crore on account of amortisation charge of toll road projects, due to which numbers were higher in the prior period.
However, the company acknowledged that challenges faced during execution of international projects in the hydrocarbon sector have proved to be a drag on the company’s profitability in 2014-2015. L&T’s EBIDTA for the January-March 2015 period stood at R3,610 crore, a fall of 3% y-o-y, while for the full year it grew by 6% to Rs 11,340 crore. EBIDTA margins stood at 13%, lower by 90 basis points for the quarter, while 30 basis points lower for the full year at 12%, due to suppressed hycrocarbon business.
“Year 2014-2015 was the year when expectations ran far ahead of the realities on the ground. The company experienced very strong headwinds with respect to progress on projects and the execution, particularly in sectors that required policy enablement and sectors that required support. Elsewhere in the world, the decline in oil prices and the persisiting uncertainties surrounding revival and growth led to some amount of slowdown in the investment climate,” R Shankar Raman, CFO, L&T, told newspersons on Saturday.
In the September quarter, the company had revised its revenue growth guidance for FY15 from 15% to a range of 10% to 15%, and later in February, the company revised its order inflow guidance too to be in the range of 15-20% from an absolute 20%.
However, strong order inflow from the domestic markets across businesses ensured L&T meet its order inflow guidance for the year. The company’s order inflows increased 22% to R1.55 lakh crore, taking the order book of the company to R2.32 lakh crore, a growth of 28% y-o-y, as on March 31. AM Naik, executive chairman, L&T, said the order book comprises only of active orders now and all the slow moving orders have been removed from it.
For FY16, L&T has given a guidance of 15% growth in both order inflows and revenues, and added that the growth will be more from the domestic markets against international businesses. “It seems like India is returning to investment cycle…We see more prospects in India now,” Naik said. He added that the company had decided to regulate its international business to 30% of the order inflows, and as that contribution had gone up to 38% last year, the company has brought it back to 25%. During FY15, 75% of L&T’s fresh orders came in from domestic market, while 25% came from overseas.
As for the bidding strategy and margins going forward, Naik said while the company would give preference to margins, it also cannot have too much of capacity built up over the years. “We will have to make a balance each time as to what the situation is with respect to capacity utilisation,” he said.
Keeping in line with L&T’s plan of hiving off its business into independent companies and listing them, Naik said company is afoot with plans of bringing an IPO for L&T Infotech and and the engineering services division L&T Technology Services by July 2016.
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