L&T Q3 net rises 19% to Rs 1,035 cr, misses estimates

Engineering and infrastructure firm Larsen & Toubro's (L&T) third quarter consolidated net profit increased by 19 per cent to Rs 1,035 crore against Rs 866 crore in the corresponding quarter last year, aided by Other Income and lower finance cost. However, it was marginally short of Bloomberg consensus estimates of Rs 1,040 crore.

The major miss was at the operating level as Ebitda (earnings before interest, tax, depreciation, and amortisation) was down eight per cent to Rs 2,650 crore from Rs 2,890 crore and the margin contracted by 180 basis points to 10.3 per cent against 12.1 per cent. Margin was hit by employee and sales and distribution expenses. Bloomberg had indicated towards Rs 3,082-crore Ebitda going by consensus estimates and the actual came significantly short.

"Employee expenses shot up 25 per cent year-on-year on account of expansion in international business and sales and distribution cost was higher by 35.3 per cent due to higher provisions," said L&T's chief financial officer, R Shankar Raman.

Total revenues increased by 8.4 per cent to Rs 26,058 crore against Rs 23,848 crore, largely driven by infrastructure, power and hydrocarbon segments. Net sales at Rs 25,387 crore came lower than Rs 26,355 crore, going by Bloomberg consensus estimates.

Raman said that the company is on course to meet its full-year revenue growth forecast of 10-15 per cent. He expects the order inflow to go up in Q4 but hinted that the order inflow growth will remain flat in FY16.

In FY16 so far, its order inflow stood at Rs 93,548 crore while order inflow in FY15 was at Rs 1,55,400 crore. Thus, to achieve the flat growth guidance the company will still have to register run rate of 30 per cent growth in order flows during the March’15 quarter.

The company stock on BSE closed at Rs 1,102.20, up 2.33 per cent.

Order inflow in Q3 increased by 11 per cent year-on-year to Rs 38,528 crore at group level during the quarter, led majorly by infrastructure segment. It included international orders of Rs 11,115 crore for the quarter. Consolidated order book of the group stood at Rs 2.56 lakh crore as of December 2015, higher by 14 per cent on a year-on-year basis with international order book constituting 27 per cent (approximately Rs 70,000 crore) of order book.

Revenue from infrastructure segment (largest segment contributing 45 per cent to gross revenues) grew by 2.5 per cent year-on-year to Rs 12,112.4 crore with Ebidta margins at 7.9 per cent , impacted by delayed customer clearances and tardy progress payments on certain jobs. Power business revenue contributing 8.5 per cent to gross revenues doubled to Rs 2,296 crore on the back of progress in coal and gas based projects. Further, the revenue from much smaller heavy engineering contributing about 3.5 per cent to gross revenues, increased by 10.9 per cent on yearly basis to Rs 948.7 crore but at EBIT level, the segment posted loss of Rs 23.8 crore against profit of Rs 41 crore in year-ago period.

Revenue growth was also contributed by defence and aerospace business while EBIT was impacted by cost & time overruns on certain process plant and nuclear equipment jobs under execution and under recovery of fixed overheads. Hydrocarbon business has registered a 22.7 per cent year-on-year growth at Rs 2,183.9 crore and reported profits at EBIT levels against losses in previous and year ago quarter.

On outlook, the company said the domestic economy continues to face headwinds to growth despite favourable macro economic factors. Tight liquidity and weak global cues have kept the markets tentative. Steep decline in oil prices, slowing growth in China, falling commodity prices, downturn in global equity markets and significant depreciation of emerging market currencies vis-a-vis the dollar have contributed to a volatile economic environment.

Furthermore, the infrastructure major said the industrial and private sector capex is likely to remain muted and the overall investment climate remains cautious with the overhang of excess capacities in many sectors.