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L&T net up 13% despite slower order inflow

BS Reporter  |  Mumbai 

Engineering company Ltd (L&T) on Monday said it expected a 15-20 per cent growth in order inflow and revenue in the current financial year, as the company reported a 13 per cent jump in net profit to Rs 4,456 crore for 2011-12, despite slower order wins.

The company’s order inflows had shrunk by 12 per cent in FY12 against a forecast of five per cent growth.

L&T’s annual sales went up 21 per cent to Rs 53,171 crore, less than the expected 25 per cent expansion.

In the March quarter, the engineering company’s net profit rose 14 per cent to Rs 1,920 crore, compared with Rs 1,686 crore in the year-ago period. Revenue went up by 21 per cent to Rs 18,461 crore from Rs 15,261 crore in the corresponding quarter in 2010-11.

“The company hopes to maintain this year’s Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin (11.8 per cent) for the next year. The margins could vary with a correction of 50 basis points, taking into account forex fluctuations and commodity prices,” said L&T Chief Financial  Officer

“The era of 13.5 per cent margins is a product of good times. We should realise that times have changed and they are not sustainable,” he added.

Last year’s order inflow was largely affected by deferred project. Raman, however, remains optimistic about the business environment. “We are happy to tell you that delay is on account of postponement and not cancellation. We are well-positioned for opportunities, should the uptick happen. We have also stepped up focus on international markets,” he said.

However, analysts feel this could be a tough challenge to get by. “Revenue growth of 15 per cent is possible considering that L&T has a large order backlog, but achieving 15 per cent growth in orders could be a Herculean task. If the macro economic environment does not improve that guidance could be at a risk,” said Chirag Shah, assistant vice-president of research at ICICI Securities Ltd.

A major part of the success of achieving order book growth depends on the company’s international markets strategy. “International markets are very crucial for them (L&T) where they have ramped up nicely. If they continue the same performance, they may draw closer to the target,” said Abhinav Bhandari, an infrastructure analyst at financial service firm Elara Capital.

L&T Chairman said the company was seriously looking at international markets. “We have not exploited the Gulf (countries) completely. We are looking to increase our market share in Qatar and Kuwait, and have started in Saudi Arabia, which has tremendous potential. We are also exploring Iraq,” he said.

Besides, the company is also looking at orders from the hydrocarbon industries in Australia, Brazil and the Commonwealth of Independent States (former Soviet republics).

First Published: Tue, May 15 2012. 00:47 IST