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Engineering and construction company Larsen & Toubro (L&T) has reported a seven per cent rise in its consolidated net profit for the September quarter of FY15 compared to the year-ago period. However, the company management has said it might miss the annual revenue and margin forecast owing to delays in projects and problems in execution of hydrocarbon projects.
Net profit rose to Rs 862 crore from Rs 806 crore and the result was aided by a two per cent decline in finance cost following refinancing of its long-term loan.
Revenue was up 10 per cent to Rs 21,331 crore from Rs 19,130 crore in the quarter. Earnings before interest, tax, depreciation and amortisation (Ebitda) was down seven per cent to Rs 2,334 crore.
The company bagged Rs 39,797-crore worth of orders in the quarter, registering 17 per cent growth. About 83 per cent of order wins were from the domestic market, reflecting early signs of recovery. Another factor was the absence of big-ticket international orders. A year ago, the company had won orders for the Doha and Riyadh metro rail projects. The infrastructure sector continued to dominate the order inflows.
While L&T did well in reporting a higher profit, the company's senior management indicated it might miss its annual guidance of 15 per cent revenue and 12.3 per cent margin.
R Shankar Raman, chief financial officer, indicated the company was expecting revenue growth between 10 per cent and 15 per cent, though the management would strive to achieve its original target.
The power and hydrocarbon segments reported a fall in revenue and on an overall basis, L&T achieved 10 per cent revenue growth in the first two quarters this financial year, which is below the target.
Raman added that profit margins in FY15 could fall 150-200 basis points largely due to problems in execution of hydrocarbon projects in the Gulf. The projects have had cost and time overruns and the company had to incur additional expenses and make provision of about Rs 900 crore. The company will raise claims of extra expenses upon completion and handover of the projects.
Raman said business sentiment had improved as initiatives were taken to remove bottlenecks, but it would take three or four quarters for full recovery in the domestic sector.
According to Senior Executive Vice-President (Infrastructure and Construction) S N Subrahmanyan, the company is exploring markets in North Africa and Southeast Asia for its power transmission business and has deputed its management to develop business. "I think we have the potential to grow our business in North Africa,'' he added.
