L&T Q2 profit up 32% to Rs 460 crore

CORPORATE SCORECARD

Engineering major Larsen & Toubro (L&T) has posted a 32.25 per cent rise in its second quarter profit to Rs 460.26 crore on increased revenue in its core businesses — engineering and construction. The 39.65 per cent rise in revenue from operations took the quarterly income to Rs 7,686.35 crore as against Rs 5,502.09 crore in the corresponding period last year.

However, investors were not happy with the company's quarterly performance as its operating margin shrank from 9.8 per cent a year ago to 8.9 per cent. Chief Financial Officer Y M Deosthalee told Business Standard that the fall in the margin was mainly due to the high expenditure incurred in new initiatives such as railway wheel manufacturing, ship building and power generation.

"The operating margin, excluding the investments in new businesses, has been maintained. The company will review the numbers if the situation further deteriorates," Deosthalee added. The company has 17 per cent liquid assets against its liabilities.

Profits from engineering and construction businesses have grown 42.86 per cent to Rs 648.39 crore, while profits from electrical and electronics businesses fell 23 per cent to Rs 84.66 crore. Income from sources other than L&T’s main operations surged to Rs 155.91 crore from Rs 112.42 crore a year earlier, boosted by dividends from subsidiaries and income from investments.

L&T shares fell the most in eight years, above 11 per cent, to Rs 893.15 on the Bombay Stock Exchange soon after the result was announced. The stock has fallen 56 per cent this year compared with a 47 per cent drop in the benchmark Sensex on concern that orders may slow as the global credit crisis holds up project financing.

L&T will be able to grow its revenue more than 30 per cent this year based on the current order backlog of Rs 63,000 crore, said Director J P Nayak. "According to an earlier plan, the company intends to complete Rs 2,000 crore capital expansion this year. So far, we have spent Rs 700 crore. The company has raised the rest of the amount mainly through internal accruals. We have not yet utilised the $400 million, which was raised through the issue of convertible bonds," Nayak said.

The company’s orders are in growing sectors such as power, infrastructure and oil & gas. Amid the economic downturn, the company has managed to secure fresh orders totalling Rs 12,453 crore during the quarter, up 74 per cent compared to the same period last year.

The share of order inflow and sales from international business stood at 21 per cent and 19 per cent respectively.