L&T reports 111% jump in net profit at Rs 967 cr

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Larsen & Toubro (L&T), India’s largest engineering and construction company, reported a 111 per cent jump in consolidated net profit to Rs 967 crore even as net sales grew 10 per cent.

The company benefited from divestment gains of Dhamra Port and strong growth in international operations.

The consolidated revenue for the quarter grew to Rs 19,123 crore, registering a growth of 10 per cent. The international revenue during the quarter grew 25 per cent to Rs 4,781 crore.

R Shankar Raman, chief financial officer of L&T said the quarter showed a surprise mix of results. On the one hand, the net profit rose substantially on divestment of its stake in Dhamra Port. Simultaneously, it was full of challenges in execution of projects both domestically as well as internationally. “Our projects in Gulf countries are now running cost overruns due to strict regulatory norms of around Rs 900 crore. We have realised we should have subcontracted a lot of our projects that we took up earlier on our payrolls,” said Shankar Raman.

Around 12.5 per cent of the company's total order book or Rs 1.95 lakh crore is slow moving, i.e., kept aside due to regulatory and policy issues.

However, the company expects the overall order book condition to improve, in both domestic and international markets, thanks to a stable Centre. Besides, it is expected that with reduction of subsidy burden on ONGC going ahead, a lot of orders in the hydrocarbon sector would get revived. Many pending bids would be opened now.

Shankar Raman adds that there are good prospects in the medium term from revival of core sectors such as infrastructure, power, minerals & metals, defence and oil & gas when the initiatives by the new government at the Centre take definitive shape and rigour. The company is confident of sustaining its growth momentum by utilising the emerging opportunities for which it has positioned itself well.

“We expect orders from power and infrastructure sector to start soon as it would suit government to start by awarding projects under the roads sector on EPC basis before interest in PPP projects perks up. Also, with India to grow at a higher rate, need for power cannot be underestimated. Hence growth in orders from power sector would also start soon,” said Shankar Raman.

Fresh orders grew 11 per cent to Rs 33,408 crore. The international order inflow stood at Rs 14,754 crore.

Infrastructure sector secured around 70 per cent of the orders where 15 per cent of the orders were from international circuit. Hydrocarbon and heavy engineering segments constituted the rest.

The consolidated order book of the group rose 13 per cent to stand at Rs 195,392 crore as on June 30, 2014. International order constitutes around 25 per cent of this total order book.

The infrastructure segment revenue grew 17 per cent to Rs 7,148 crore for the quarter, driven by heavy civil infrastructure, transportation infrastructure and water and renewables.

The power segment recorded a customer revenue of Rs 982 crore during the quarter ended June 30, 2014, registering a reduction of 32 per cent over the corresponding quarter of the previous year due to depleting order book and lower revenue accretion on jobs nearing completion.

L&T shares fell 0.70 per cent to close at Rs 1,644.75 on the Bombay Stock Exchange.

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