Larsen and Toubro (L&T) on Friday reported a weak set of numbers, missing estimates on all fronts. The company’s net profit fell a sharp 17% year-on-year to Rs 2,055 crore, missing the Bloomberg consensus estimate of Rs 2,392 crore. The muted performance was on account of higher raw material and fuel prices which impacted margins.
During the period, other income earned by the company through treasury operations was lower, both due to lower volumes of investment as well as lower yield available in the money market. Consequently, operating profit at Rs 2,100 crore came in lower by 9% y-o-y. L&T reported other income of Rs 571.39 crore — nearly half of the third quarter last year.
Weak order inflows and absence of any large one impacted the order intake during the quarter. The fresh order intake was almost a third of the corresponding quarter at Rs 50,359 crore. In Q3FY21, L&T had the benefit of securing the biggest-ever EPC contract for Mumbai-Ahmedabad High Speed Rail in the infrastructure segment.
The consolidated order book of the group was at Rs 3,40,365 crore as on December 31, 2021, at record levels, with international orders having a share of 24%.
L&T’s revenue from operations grew 11% y-o-y to Rs 39,563 crore, reflecting an improving project execution momentum and robust growth in the IT and technology services portfolio. International sales during the quarter at Rs 14,541 crore constituted 37% of the total revenue. The revenues were below estimate of Rs 39,732 crore.
Ebitda increased 6% y-o-y to Rs 4,530 crore, again below Bloomberg estimate of Rs 4,573 crore. Ebitda margins remained stable with a 60 bps y-o-y decline to 11.4%, subject to quarterly volatility inherent in the projects business.
L&T chief financial officer R Shankar Raman said the quarter was marked by both opportunities and challenges, with inflation being the biggest challenge. “During the quarter we had to deal with worrisome inflation. We also had to adjust to the new supply chain protocols and the logistics constraints that the pandemic threw up,” he said. However, rising demand post the festive season, fairly active working by the industry, and robust tax collections by the government presented opportunities. “The quarter also saw a fair bit of geopolitical realignment, and consequently firming oil prices, which opened up business possibilities overseas as well,” he added.
During the quarter, orders were received in various businesses like hydrocarbon offshore, metros, rural water supply, minerals and metal, public space, health infrastructure and power transmission and distribution. International orders at Rs 20,521 crore comprised 41% of the total order inflow, with receipt of large value international orders in hydrocarbon offshore.
The heavy engineering and infrastructure major said though the tendering activity in the domestic markets picked up 30% y-o-y during the quarter, the actual contract awarded remained at the level of previous year. Hence, the award-to-tender ratio of Q3FY22 was trending lower at 57% against 73% of the previous year.