L&T profit up 39%; revises its revenue, order inflow guidance

Management noted demonetisation caused disruption, would be difficult to quantify scale of impact

Engineering major Larsen & Toubro (L&T) on Saturday revised downwards its guidance for order inflow and revenue growth in the current financial year citing delays in ordering activity and other execution headwinds. For quarter ended December 2016, the company reported a 39 per cent jump in net profit owing to a better operational performance.

The management noted demonetisation has caused disruption but said it would be difficult to quantify the scale of the impact.

L&T in the October-December 2016 quarter reported a consolidated net profit of Rs 972. 47 crore against Rs 700.34 crore reported in the same period a year ago. Revenue from operations for the December quarter was at Rs 26,286 crore compared to Rs 25,928 crore in the corresponding quarter -- a rise of just 1 per cent. The company missed Street expectations for its net profit numbers. 

Earnings before interest, tax, depreciation and ammortisation or Ebitda was higher at Rs 2,520 crore, against Rs 2,130 crore a year ago. The company attributed the growth in Ebitda to the turnaround seen in sectors like engineering and hydrocarbon which were badly hit in the corresponding quarter.

The L&T management has also revised its growth guidance for both its expected order inflow and revenue for the current financial year. “It is possible for us to end the year with a 10 per cent growth in order inflow against the 15 per cent we had guided earlier,” Shankar Raman, chief financial officer, L&T, said at a press conference. Raman also revised the company’s revenue growth guidance to 10 per cent from the earlier 12 per cent. Guidance for margins growth on a year-on-year basis was maintained at 50 basis points for the current financial year. The consolidated orderbook stood at Rs 2.58 lakh crore, 1.4% higher from a year ago. “We are at 6% for the nine months period, factoring the surge in order inflow that we typically see in the fourth quarter we will think we will reach 10 per cent growth in order inflow,” he added. The company’s order inflow for the December quarter was at Rs 34,890 crore, which is 10 per cent lower than Rs 38,710 crore seen in the same quarter a year ago. ”Order Inflow decline due to muted domestic capex and delay in awards,” Raman said.  He added revenue guidance has been lowered due to current execution challenges and the company does not expect these headwinds to go away anytime soon. 

“Land acquisition issues, right of way issues continue to be a challenge. Second challenge is of liquidity where there is an NPA overhang on new completion of new financial closures.  Some clients are pacing execution to suit their needs, clearance of work certificates are taking longer,” he said.

On demonetisation, Raman added there has been an impact and in some sectors like roads and real estate a more visible one. “The impact on toll road alone is Rs 100 crore, residential bookings in the realty has slowed down but how much of it is due to demonetisation and how much due to opportunistic assessment of price correction we do not know yet,” Raman said. L&T has so far received Rs 20 crore from the government as compensation for the Rs 100 crore lost on toll road projects. “The Rs 20 crore was as O&M costs, once the decision to pay for full revenue loss was taken, the payment of O&M cost has slowed down,” Raman added.

In terms of the outlook on the investment climate, Raman added, “It remains challenging. Private sector capital investment is still shying away, government outlay on large programme continues to remain elusive, announced with delays and award timelines are extending,” he said.