Larsen & Toubro stated that the short-term business environment continues to remain challenging.
The country’s biggest engineering and construction firm Larsen & Toubro (L&T) on Friday missed analysts’ estimate by posting a consolidated net profit at Rs 606.2 crore for the April-June quarter, a 37.3% decline over the same period last fiscal, with the company stating that the short-term business environment continues to remain challenging.
Consolidated net sales grew 6.7% to Rs 20,250 crore, which was in line with estimates. Of this, Rs 6,609 crore came from jobs being executed overseas, constituting 32% of the total revenues.
Operating profit (earnings before interest, tax, depreciation and amortisation) declined 9% year-on-year (y-o-y) to Rs 2,290 crore and margin declined 190 basis points to 11.3% during the quarter, both below estimates.
Company officials said that the first-quarter profit included exceptional gains made on account of stake sale of Dhamra Port, L&T Finance Holdings and City Union Bank, which was not the case in the April-June 2015 quarter.
The company won new orders worth Rs 26,376 crore during the quarter, down 21% on an annualised basis, which included international orders worth Rs 8,110 crore. The major orders were in the infrastructure and hydrocarbon segments.
However, there was a year-on-year reduction of 17% in the fresh order intake in the infrastructure segment during the quarter.
The consolidated order book increased 22% to Rs 2.39 lakh crore compared with the year-ago period.
The company continues to have between Rs 5,000 crore and Rs 6,000 crore as slow-moving orders in the overall order book, which are largely in the urban infrastructure and minerals and mining sectors.
CFO Shankar Raman said: “While optically it looks as an under-performance to the effect of 37% fall in the net profit, if the profit and loss is stripped off these three lumpy transactions, our business in the current quarter has actually done better.”
He said that while the domestic orders during the quarter have remained consistent with the numbers seen in the corresponding quarter last year, international orders have come in lower. However, the inflows, he said, were in line with the company’s expectations. “Last year we had won some large marquee projects, which are not likely to repeat on a year-on-year basis due to which the overall order inflows looks weak,” Raman added.
SN Subrahmanyan, senior executive vice-president (infrastructure and construction), added that infrastructure, services, financial and real estate businesses should be the growth drivers for the company going forward.
“The fact remains that some of the announcements being made in the infrastructure segment, for them to reflect in tenders or prospective orders is still not visible, but we remain cautiously optimistic on that… Apart from this, services business has seen reasonable traction. Also, real estate through both what L&T does as well as L&T Realty will grow further from here.”
Raman said that the company as of now will be keep its guidance of 15% growth in both order inflows and revenues “intact”.
The company’s shares on Friday closed up 0.75% at Rs 1789.55 each on the BSE.