L&T posts Rs 31.70 billion profit in Q4, beats estimates

Projects double-digit growth in revenue, order inflow in FY19

Engineering conglomerate Larsen & Toubro (L&T) reported a 5 per cent year-on-year increase in its consolidated profit after tax (PAT) at Rs 31.70 billion for the quarter ended March 2018 on improved operational performance, surpassing the Bloomberg consensus estimate of Rs 29.95 billion. The company, which beat its revised guidance for order inflow in the last financial year, remains optimistic of a promising year ahead for new orders.

The firm’s revenues from operations were Rs 406.80 billion, 11 per cent higher than Rs 366.20 billion reported in the corresponding quarter a year earlier. These were a tad short of expectations of Rs 411 billion. Earnings before interest, taxation, depreciation and amortisation (Ebitda —an indication of operating profitability) came in at Rs 53.90 billion, or 23 per cent higher than Rs 43.80 billion reported in the same quarter a year back.

“The numbers are satisfactory in the context of the current situation, where the capital goods industry is caught in a crossfire of headwinds and tailwinds,” said R Shankar Raman, whole-time director and  chief financial officer at L&T. Shankar Raman was referring to headwinds like higher oil prices and other macro factors. He, however, added that government reforms like the Real Estate Regulatory Authority (RERA), the goods and services tax (GST), and Insolvency and Bankruptcy Code (IBC) proceedings had worked as tailwinds for the industry.

In its outlook for the current financial year, L&T guided for a 10 per cent to 12 per cent growth in its order inflow compared to FY18, 12-15 per cent growth in revenue, and a stable (with an upward bias of 25 basis points) operating profit margin. The management expects the government and public-sector driven orders to continue to be a major contributor. “Private capex is still muted and we do not expect it to return in the next two years,” said S N Subrahmanyan, chief executive officer and managing director, L&T.

For 2017-18, L&T reported an order inflow of Rs 1.52 trillion, 7 per cent year-on-year growth, beating its revised guidance of flat to 5 per cent growth announced in November last year. In Q4, L&T received orders worth Rs 496 billion, which were also at the top end of expectations of Rs 450-Rs 500 billion.

In 2017-18, the company said, it undertook staff rationalisation of 3,000 employees for its core projects and engineering business, while there was staff augmentation of 9,000 employees on the services side, leading to net employee addition of 6,000. On its recently concluded Infrastructure Investment Trust (InvIT), which saw investments from Canada Pension Plan Investment Board, Allianz Capital Partners and other financial institutions, L&T said, for now there were no plans to add more assets to the InvIT.

The standalone business includes heavy engineering, power, hydrocarbon, electrical & automation (L&T announced its sale for Rs 140 billion in Q1FY19 to Schneider) and infrastructure, while consolidated numbers include the standalone as well as financial services, information technology and developmental projects (road, metro, etc). The standalone numbers were a mixed bag with topline at Rs 269.42 billion, higher than the Bloomberg estimate of Rs 259.87 billion, while net profit at Rs 23.06 billion fell short of Rs 25.53 billion.

The infrastructure, which accounted for 8 of the top 10 new orders by value in the Q4, clocked 15 per cent year-on-year increase in revenue and 12 per cent in operating profit. Its share of order inflow jumped from 52 per cent in the first nine months of FY18 to 57 per cent for the full fiscal year.