Impact of job mix, lower margin accruals and lower other income
Larsen & Toubro Ltd. (L&T) reported a 12 per cent decline in net profit at Rs.756 crore for the first quarter ended June 30, 2013, as compared to Rs.864 crore in the same period of the previous year.
This was on account of job mix, lower margin accruals, and lower other income, the company said.
L&T reported below expected growth in gross revenue at Rs.12,704 crore against Rs.12,078 crore, up by 5 per cent. During the quarter, the company generated fresh orders of Rs.25,159 crore, up 28 per cent as compared to the same period last year.
“The main reason for the decline in net profit was due to dip in earnings before interest, tax, depreciation and amortisation (EBITDA), and other income. The quarterly dip is not indicative of the year ahead,” said R. Shankar Raman, whole-time director and Chief Financial Officer (CFO).
He said EBITDA during the quarter dropped from 9.1 per cent to 8.5 per cent on account of lower volume of sales. He said the capacity set up for power, hydrocarbon, metals and mineral vertical remained underutilised due to shrinkage in order flow. “Concern in the power, mining and mineral sectors remains,” he added.
“The (overall) situation is challenging on the ground despite the government pushing through big ticket reforms. For the next two years, the situation looks challenging so we are looking at international project to improve margins,” said K. Venkataramanan, CEO and Managing Director.
As the results were below market expectations, the L&T stock bore the brunt, and plunged sharply after the announcement of the results to close at Rs.901.95, down 7.46 per cent on the BSE.
“L&T numbers are lower than our expectations. Notwithstanding the disappointing numbers, on a long-term basis, we continue to be positive on the company,” said Sanjeev Zarbade, Vice-President-Private Client Group Research, Kotak Securities.