L&T Q1 Results: Profit Slumps 79% As New Orders Dry Up Amid Covid-19 Lockdown
Net profit fell 79% to Rs 303 crore in the quarter ended June.
Larsen & Toubro Ltd. reported a sharp decline in quarterly profit as new orders dried up and ongoing projects were disrupted following the nationwide coronavirus lockdown.
Net profit fell 79% to Rs 303 crore in the quarter ended June compared with a profit of Rs 1,472 crore a year ago, according to L&T’s exchange filing. Analysts’ estimates compiled by Bloomberg had pegged a loss of Rs 468 crore.
The company would’ve reported a loss had it not been for a one-time gain of Rs 224.7 crore from the sale of its wealth management business and a deferred tax reversal of Rs 307 crore during the quarter.
- Revenue fell 28.3% over last year to Rs 21,260 crore.
- Operating profit fell 47.2% to Rs 1,620.5 crore.
- Margin narrowed to 7.6% from 10.4%earlier.
The year-on-year numbers aren’t strictly comparable as last year’s figures do not include Mindtree Ltd.’s results, which L&T has acquired.
The conglomerate—seen as a barometer for private investments in India—received orders worth Rs 23,574 crore during the quarter, a decline of 39%. Almost half of those orders were in the infrastructure segment. L&T’s total order book stood at Rs 3.05 lakh crore with a quarter of those being international projects.
The nationwide lockdown brought economic activity to a grinding halt. With migrant workers leaving cities to return home, infrastructure projects were mired with labour shortage. Amid the uncertainty, companies started deferring capital expenditure plans, preferring to sit on cash rather than investing and expanding capacity.
Revenue was impacted by nationwide lockdown, resulting in halting of manufacturing and construction activities, non-availability of labour and disruptions to the supply chain ecosystem.L&T Earnings Statement
L&T lost about Rs 12,500 crore of revenue in the quarter due to the lockdown, Chief Financial Officer Shankar Raman said at a post-earnings call. The revenue ramp-up will take a few more quarters to reach normal levels, he said. “This quarter has been very unusual for the challenges it posed.”
Chief Executive Officer SN Subramanian said L&T was among the companies most impacted by the lockdown. “We saw one of the most stringent lockdowns. 85% of our company hardly worked and despite that we posted revenues and orders wins,” he said on the call. “Many states like Maharashtra, West Bengal, Karnataka are still seeing restrictions on work.”
Subramanian said that only 30% of its workforce is now back at work.
The lockdown dealt a severe blow to both demand and supply, L&T Group Chairman AM Naik wrote in his annual letter to shareholders on Tuesday. “Lockdowns in country after country have stalled the world’s growth engine casting a long shadow of economic uncertainty for some time to come.”
Naik also said that it would be premature to predict L&T’s business outcomes for FY21 amid the pandemic.
Capex Spends
Subramanian said capital expenditure by governments and public sector units is needed to revive the economy and generate jobs.
“In our rough, estimated capex of central, state and PSUs of Rs 8 lakh crore will come down to Rs 4 lakh crore this year as money is reallocated to social sector due to pandemic,” he said.
The government realises the need to step up capex and is expected to revive spending through funding from multilateral institutions, Subramanian said. L&T will be one of the beneficiaries of this, he said.
Shares of L&T closed 1.8% lower ahead of the quarterly results announcement while the benchmark BSE Sensex closed 0.16% lower.