L&T full year profit drops 27% to Rs 2,069 cr

L&T missed its annual revenue estimate, but surpassed its annual order inflow target with 22% growth

Larsen & Toubro (L&T) on Saturday reported a 27 per cent fall in consolidated net profit for the quarter ended March this year, owing to slower sales growth and a fall in margins for most of its key businesses.

The company’s net profit stood at Rs 2,069 crore, compared with Rs 2,840 crore in the corresponding period last year. Quarterly revenue grew four per cent to Rs 28,022.crore on a year-on-year basis, while the earnings before interest, tax, depreciation and amortisation margin was 13 per cent, down 0.9 percentage points.

While the company missed its annual revenue estimate, reporting eight per cent growth (against a revised 10-15 per cent guidance), it surpassed its annual order inflow target with 22 per cent growth, compared with the revised estimate of 15-20 per cent.

For FY15, overall orders wins stood at Rs 1.55 lakh crore, with the bulk of orders coming from the infrastructure segment. L&T said it anticipated a rebound in the economy and expected 15 per cent growth in orders and revenue in FY16.

Though the company’s revenue missed analyst expectations, its profit exceeded estimates. Bloomberg had estimated L&T’s consolidated revenue at Rs 32,000 crore and net profit at Rs 1,715 crore.

Consolidated profit after tax (PAT) for FY15 stood at Rs 4,765 crore, against Rs 4,902 crore for the previous financial year, primarily due to challenges faced in the execution of international projects in the hydrocarbon sector, the company said in a statement.

While foreign contracts drove L&T’s growth in the past couple of years, the company will now focus on its domestic business. This will limit execution risks faced by the company in recent years. This year, L&T will also explore opportunities to monetise development projects such as those in the roads segment.

In FY15, domestic orders accounted for 75 per cent of the overall inflow, compared with 67 per cent in the previous year.

“We now see more prospects in India. Our reliance on international projects is coming down. With a decline in oil prices, projects in the Gulf are being deferred. The domestic situation is looking better,” said A M Naik, L&T’s group executive chairman.

He added the company was confident of securing orders in the road construction space, owing to the government’s push on infrastructure. He said the company had already secured eight orders in that segment. Also, its hydrocarbon business in India is expected to perform better, considering the proposed expansion of five fertiliser plants.

Naik said the company’s revenue was hit by project constraints such as land acquisition woes and liquidity concerns of customers. “It is not due to execution issues from our side.”

R Shankar Raman, L&T’s chief financial officer, said the company had been recording 20 per cent year-on-year growth in orders. “Inflows have become large and it is not easy to replicate it endlessly,” he said.