L&T Q2 Results: Profit, Order Inflow Decline Despite Easing Lockdown Curbs
L&T’s net profit before exceptional item fell 41.8% year-on-year to Rs 1,462.84 crore in the quarter ended September.
Larsen & Toubro Ltd.’s quarterly profit and revenue fell, and order inflows slowed, even as the nation eased the lockdown curbs.
Net profit before exceptional item fell 41.8% year-on-year to Rs 1,462.84 crore in the quarter ended September, India’s largest engineering-to-construction company said in an exchange filing. That compares with the Rs 1,234.9-crore consensus estimate of analysts tracked by Bloomberg.
Including exceptional item, the loss stands at Rs 2,322.10 crore.
L&T, in the reported quarter, posted an exceptional cost of Rs 3,732.30 crore, comprising impairment of funded exposure in the heavy forgings facility joint venture and impairment of assets in the power development business.
L&T completed the sale of its electrical and automation unit to Schneider Electric during the July-September period. It also announced a special dividend of Rs 18 apiece.
Revenue fell 12.2% over the year ago to Rs 31,034 crore
Operating profit fell 12% to Rs 5,318.77 crore
Margin stood at 17.1%
The year-on-year numbers aren’t strictly comparable as last year’s figures don’t include Mindtree Ltd.’s results, which L&T acquired, and the switchgear business.
Order Book
L&T’s order book inflow during the quarter stood at Rs 28,039 crore — a decline of 42% over the corresponding quarter a year ago.
International order during the quarter constituted 36% of the total order inflow. The consolidated order book of the group stood at Rs 2,98,856 crore as on Sept. 30, 2020.
L&T, which has stopped providing guidance for order inflow, said it's "seeing tremendous uncertainty in the current environment". "We are still discovering what the new normal could be post Covid," said R Shanker Raman, chief financial officer at L&T during the press interaction. "We are not a committing to a guidance this year."
The company, however, received a letter of intent for high speed rail project or bullet train valued at Rs 25,000 crore. The project will be completed in four years, adding to order inflow in the third quarter.
Still, at the moment, the orders are coming in from only state and central government, many funded by multi-lateral agencies, said SN Subrahmanyan, managing director and chief executive officer at L&T. Private capital investment will be tough in the next two years, he said.
Segment-Wise Performance
Revenue for the infrastructure segment fell the most among segments. Though order activity picked up compared to the first quarter, bid deferrals and loss of some select prospects impacted order inflow. Revenue of the IT and technology business registered a growth of 5%, while that of financial services declined 3%.
Outlook on Capital Spends
A strong emphasis by the government on infrastructure spending augurs well for the company, and the National Infrastructure Pipeline, which lays out a detailed capex road map till 2025, provides visibility on the domestic infrastructure outlook.
Sectors such as water, power transmission and distribution, metro/regional rapid transit system, railways, roads and expressways are witnessing increased traction as far as bidding / tendering activity is concerned.
Shares of L&T closed 0.41% higher before the quarterly results were announced, compared with a 1.34% drop in the benchmark Nifty 50 Index.