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L&T Q3 profit up 39%, cuts FY17 revenue growth guidance to 10%

Chillicious Bureau

Engineering and construction major Larsen & Toubro on Saturday said consolidated profit in Q3 increased 39 percent year-on-year to Rs 972.4 crore but slashed its full year revenue growth guidance to 10 percent from 12-15 percent earlier due to challenging business conditions. Good operational performance boosted bottomline growth.

The company recorded consolidated revenue for the quarter at Rs 26,286 crore, a growth of only 1.4 percent on yearly basis due to delay in execution of projects despite healthy order book. It was mainly impacted by infrastructure, power, heavy engineering, electrical & automation and developmental projects businesses.

L&T expects the challenging business conditions to continue in next few quarters until the government moves to lift growth through infrastructure spend and tax reforms take effect.

“Aided by cost optimisation through supply chain efficiencies, productivity enhancement through digitalisation and working capital reduction, L&T is hopeful of a satisfactory performance given the current business environment,” the company said in its filing.

The engineering major garnered fresh orders worth Rs 34,885 crore in the quarter gone by, down 10 percent YoY amid subdued business environment but that was far better than analysts’ expectations of Rs 25,000-30,000 crore.

Order inflow included international orders worth Rs 11,865 crore. With this, total order inflow for nine months period stood at Rs 95,706 crore. Now the company is required to report fresh orders worth Rs 58,000 crore in Q4FY17 to meet its full year guidance of 15 percent growth over FY16.

Consolidated order book of the L&T Group was healthy at Rs 2.58 lakh crore at the end of December quarter, higher by 1.4 percent compared with year-ago period.

Earnings were mixed during the quarter. Profit was expected at Rs 1,104 crore on revenue of Rs 27,423 crore and operating profit was estimated at Rs 2,628 crore with margin at 9.6 percent for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

Operating profit on consolidated basis increased 18.7 percent year-on-year to Rs 2,522 crore and margin expanded by 140 basis points to 9.6 percent despite a 96 percent increase in depreciation expenses.

Finance cost during the quarter declined 6.3 percent to Rs 378.77 crore and tax expenses fell 14 percent to Rs 440 crore YoY, which also boosted bottomline.

Infrastructure business, which contributed 48 percent to total revenue, grew by 5 percent year-on-year to Rs 12,735 crore and its EBIT (earnings before interest and tax) increased 12.9 percent to Rs 879.3 crore in Q3.

“Delays in obtaining clearances and work slowdown, due to abrupt liquidity constraints of customers aggravated by demonetisation, impacted progress of jobs under execution especially in buildings & factories business,” L&T said.

Power business slipped 22.84 percent to Rs 1,632.96 crore due to low order book, and its EBIT plunged sharply by 88.6 percent to Rs 11.90 crore compared with year-ago period.

Heavy engineering revenue declined 6.3 percent year-on-year to Rs 870.33 crore but the segment turned profitable at EBIT level with income of Rs 126.17 crore against loss of Rs 11.82 crore in corresponding quarter of last fiscal.

Hydrocarbon business during the quarter rose by 13.4 percent to Rs 2,402.28 crore and its EBIT stood at Rs 148.42 crore against loss of Rs 4.55 crore in year-ago period.

On standalone basis, profit jumped 24.2 percent year-on-year to Rs 954.17 crore and operating profit grew by 52 percent to Rs 1,351 crore with margin expansion of 280 basis points but revenue increased only 0.5 percent to Rs 15,946.20 crore in the quarter gone by.