Larsen & Toubro Ltd’s (L&T) net profit rose 39% for the third quarter ended December 31, 2016 to Rs. 972 crore as compared with Rs. 700 crore in the same period last year despite strong headwinds, which led to a revised revenue forecast.
The technology, engineering and construction major’s revenue grew 1.4%, under the current adverse economic situation, to Rs. 26,287 crore as compared with Rs. 25,928 crore in the same period last year.
The company’s order inflow during the quarter declined by 10% to Rs. 34,885 crore as compared with Rs. 38,710 crore in the same period last year — an indicator of the ongoing subdued business environment.
Still, major orders were secured in the infrastructure and hydrocarbon segments during the third quarter, it said.
“It was an eventful quarter. We did well in cost management and profitability fronts. However, we have not been able to cope with the headwinds in case of execution of orders and securing new orders,” said R.Shankar Raman, Whole time Director & Chief Financial Officer, L&T.
“The promises and the programmes announced by the government were elusive and under this background the company has done well,” Mr. Raman added.
Revised revenue forecast
However, looking at the current situation, the company has scaled down its revenue and order inflow growth guidance to 10% from 15% projected earlier.
“For the nine months, we are at 6% growth. We will end the year with 10% growth,” Mr. Raman said.
The infrastructure segment registered a growth of 6%. “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 and factories business,” the company said.
The power segment was impacted by low order book and the heavy engineering segment suffered due to deferment of new order placements.
However, the hydrocarbon business that was earlier making losses has turned around and reported revenue growth of 14%.
The financial services segment and IT & Technology Services segments reported 11% and 9% revenue growth respectively.
Challenging times ahead
On the outlook the company said the challenging business conditions would continue in the next few quarters until the government moves to lift growth through infrastructure spend and tax reforms.
“We are cautiously optimistic. There is a battle ahead and we want to face it smiling,” said S.N. Subrahmanyan, Deputy Managing Director and president, L&T.
Unlike in the previous quarter, when the company laid off 15,000 people, during third quarter there was no unusual attrition. Mr Subrahmanyan said: “In fact we are hiring.”
“Consolidated orderbook of the group stood healthy at Rs. 2,58,585 crore as on December 31, 2016, higher by 1.4% on a year-on-year basis. International orderbook constituted 29% of the total orderbook,” the company said.
L&T said its infrastructure segment achieved customer revenue of Rs. 12,467 crore for the December quarter, a y-o-y growth of 6%.
It said transportation infrastructure and water and effluent treatment businesses contributed to the revenue growth during the quarter. International revenue constituted 37% of the total customer revenue of the segment.
During October-December 2016, the infrastructure segment won fresh orders of Rs. 21,516 crore despite sluggish investment climate, it said.
Some of the anticipated orders did not materialise due to delay in bid process, the company added.