Larsen & Toubro reported a 11 per cent growth in net profit for the third quarter ended December 31, 2010, at Rs.841 crore against Rs.759 crore in the year-ago period. It reported a 40 per cent jump in revenues at Rs.11,413 crore against Rs.8,145 crore.
The operating profit was up 23 per cent at Rs.1,238 crore (Rs.1,007 crore) but there was a 25 per cent de-growth in order inflow at Rs.13,366 crore (Rs.17,793 crore). Operating margins dropped to 10.8 per cent against the year-ago figure of 12.4 per cent.
Addressing the media, Y. M. Deosthalee, CFO, said deferment of orders and postponement of government contracts over the last few quarters are an area of concern. “This quarter had extremely healthy sales growth of 40 per cent which reflects the pace of execution. But at the same time last year, there was drop in sales of 6 per cent and therefore, this volatility is inherent in this business.”
“In fact, orders from several sectors like the hydrocarbon sector have been postponed till March. It is also possible that things may be shifted to a subsequent period.”
The company's earlier guidance had indicated a 25 per cent growth in orders for the full year. “In March, we expect the orders to come in. But, if for some reason, there is a further postponement of decisions, there could be some slippage and we may have a shortfall,” he said.
Cost escalation
On the drop in margins, Mr. Deosthalee said, “in spite of the fact that sales and execution pace picked up, not all orders are for margin recognition. Also some our businesses were impacted by the inflation in commodity prices. Also about a third of our project jobs do not have an escalation clause and we have had to absorb the increase in cost. In several businesses we have not passed on the hikes immediately. We will attempt to recoup some increase in input prices through price hikes.”
The company is confident of orders from the hydrorcarbon and construction sectors.
K. V. Rangaswami, Director, said, the number of orders not yet decided in the infrastructure sector during the year-to-date amounted to Rs. 50,000 crore. “These could be decided in March or in the first quarter of next year.”
On the overseas business, K. Venkataramanan, Director, said the company was pursuing opportunities in the hydrocarbon business in Middle East / North Africa, Vietnam, Burma and Australia.”
For the nine months ended December 31, 2010, the company &T reported a 23 per cent drop in net profit at Rs.2,272 crore (Rs.2,937 crore) on a 22 per cent rise in revenues at Rs.28,618 crore (Rs.23,453 crore). Operating profit was up 22 per cent at Rs.3,266 crore (Rs.2,684 crore).
