L&T’s New Orders Fall To Lowest In Over 3 Years; Maintains Guidance
L&T reports operationally weak earnings in April-June quarter.
Infrastructure giant Larsen and Toubro Ltd.’s new orders fell to their lowest in more than three years as private investments are yet to pick up in Asia’s third largest economy.
Order inflows declined 11 percent to Rs 26,352 crore in the quarter ended June over the year-ago period, according to L&T's earnings statement. Thirty percent of these came from international projects. The slowdown reflects a “muted” capital expenditure environment as the trend of higher public sector spending and lower private investments continues, a company presentation said.
India’s largest infrastructure conglomerate’s fresh orders mirror the weak investment environment. New project announcements fell to their lowest in the last three years during the quarter, according to economic think tank Centre for Monitoring Indian Economy. The private sector’s capital spending has been low over the last five years due to excess capacity buildup, weak demand and high debt.
Less capex means that the onus of kick-starting the investment cycle falls on Prime Minister Narendra Modi’s government, which has increased spending on infrastructure.
That reflected in L&T’s earnings. “Major orders during the quarter were secured by the infrastructure segment,” L&T said in a stock exchange filing. Domestic orders grew 12 percent over a year ago, but international segment declined 40 percent dragging down the overall number.
The company kept its order inflow guidance unchanged at 12-14 percent, SN Subrahmanyan, managing director and chief executive officer, said in a post-earnings media conference.
Profit Misses Estimates
The engineering giant's net profit rose 46 percent in the June-ended quarter to Rs 893 crore over a year ago. Analysts tracked by Bloomberg had estimated Rs 930 crore.
Revenue grew 10 percent to Rs 23,990 crore, with global orders contributing a third of it. International orders now constitute a little over a quarter of L&T's total order book of about Rs 2.63 lakh crore.
Operating income went up 8.9 percent, while operating margin narrowed 10 basis points to 8.6 percent.
L&T also kept the revenue guidance unchanged at 12 percent and said its margins will improve by 25 basis points in the ongoing financial year.
Segment Performance
- Revenue from the infrastructure segment grew 16 percent to Rs 10,539 crore year-on-year. International orders comprised 32 percent of the total order in the segment.
- Revenue from the power rose 2 percent year-on-year to Rs 1,763 crore.
- Revenue from the hydrocarbons grew 19 percent over a year ago to Rs 2,546 crore. More than half of this came from the international business due to one large order.
- Revenue from the heavy engineering segment declined 5 percent to Rs 625 crore.