Sees first sales decline in seven years at 6%, cuts year’s revenue forecast growth to 10%
Larsen & Toubro (L&T), India’s biggest engineering company, witnessed its biggest share price fall in six months after the company reported its first sales decline in seven years and lowered its full-year revenue expectation, citing project delays.
Net profit halved to Rs 758.8 crore in the three months ended December 31 from Rs 1,520.4 crore in the same period last year, the first drop since the second quarter of 2006. The profit fall is mainly due to a one-time gain of Rs 916.3 crore in the same quarter last year from the sale of its concrete business to Lafarge.
Profit after tax from ordinary activities, which excludes the one-time gain, has risen 15.26 per cent to Rs 696.3 crore because of improvement in manufacturing and material cost. However, net sales fell 6 per cent to Rs 8,071.4 crore, the first drop in revenue since the third quarter of 2002.
“The sales revenue remained subdued as a result of slower progress of certain jobs due to various extraneous factors, as well as the effect of delayed financial closure of a few infrastructure projects. Deferment in release of some high-value customers’ orders, including those in the hydrocarbon upstream sector, also resulted in lower sales during the quarter,” said the company in a statement.
It forecast on Thursday that revenue would grow 10 per cent for the full financial year, slower than the 15 per cent projected earlier, but maintained its order growth target at 30 per cent.
“We have reviewed the progress and decided to lower the full-year estimate because of delays in executions and financial closure,” said Chief Financial Officer Y M Deosthalee. Analysts said the difficult conditions could last another quarter or two, but the long-term outlook remained upbeat.
The shares of L&T, which more than doubled last year, fell 6.85 percent to Rs 1,524.10 on the Bombay Stock Exchange, the biggest drop since July 6. The benchmark stock index dropped 2.4 per cent. The stock had jumped 117 per cent in 2009, outshining the 81 per cent rise by the benchmark index.
“The share has reacted because of deviation from the standard expectation from the company,” said Vice-President R Shankar Raman.
The company said it has orders valued at Rs 91,104 crore in hand. New orders in the December quarter rose 22 per cent, compared with 47 per cent jump in the three months to September. The bulk of the orders came from power, fertiliser and building sectors, but some high-value hydrocarbon sector projects were deferred, the company said.
"Order flow has picked up and should go faster, going forward. We anyway have a huge order book which is to be executed over the next couple of years," said Deosthalee.
Operating margins improved to 12.5 per cent from 11.2 per cent, L&T said. The company plans to spend Rs 25,000 crore on setting up 5,000 Mw of power generation capacity, as the government seeks to ease energy shortages in the world’s second-fastest-growing economy.
Operating profit margins for its engineering and construction division, which contributes 80 per cent of revenue, rose to 13.4 per cent from 12.2 per cent a year earlier, the company said.
