Gross Sales of Larsen & Toubro Limited for the quarter ended December 31, 2008, at Rs. 8700 crore, has grown by 35% over the corresponding quarter of previous year.
Despite an environment of tight liquidity, cautious investment in the Oil & Gas and the Core sectors , and a general slowdown in domestic infrastructure spending, the Company has been able to secure fresh orders totaling to Rs. 14620 crore during the quarter, exceeding the order inflow of Rs. 13019 crore achieved duringthe same quarter of the previous year when the economic climate was significantly better.The Company is well on its ways towards consolidating its overseas presence, as reflected in its share of Sales from international business at 18.5% for the quarter.
Profit before Interest and Tax from normal operations for the quarter ended December 31, 2008, at Rs 1009 crore, has risen by 37%, when compared with the corresponding quarter of the previous year. The company has reported Profit after Tax at Rs. 604 crore from normal operations during the quarter, recording an increase of 25% y-on-y, after absorbing a higher incidence of borrowing costs.
On a overall basis, Profit after Tax for the quarter ended December 31, 2008 at Rs. 1520 crore, which included an extraordinary gain of Rs 916 crore (net of tax) from the sale of the Company’s Ready Mix Concrete business, grew by 216% y-on-y.
For the nine month period ended December 31, 2008, the Company’s Sales at Rs. 23468 crore grew by 41% and Profit after Tax from normal operations at Rs. 1567 crore went up by 30%, over the corresponding period of the previous year.Including extraordinary gain from sale of Ready Mix Concrete Business, the profit after Tax for the nine month period ended December 31, 2008 stood at Rs. 2283,a growth of 106 y-on-y.
Bucking the current industry downturn, the segment has bagged healthy project orders during the quarter, reaffirming the Company’s leadership position in turnkey project execution, infrastructure and capital goods sectors. The segment Order Inflow, at Rs. 13379 crore registered a growth of 17% over the corresponding quarter of the previous year. The segment revenues for the quarter at s. 7633 crore grew by 54& y-on-y.
Cumulatively for the nine month period, the segment order inflow at Rs. 34126 crore rose by 36% and segment revenue at Rs 19165 crore grew by 51% over the corresponding period of the previous year.
The Segment Order Book as at December 31, 2008 stood at a record high of Rs. 67029 crore, providing visibility to the growth trajectory of the segments performance in the medium term. The share of International orders in the Order Book as on December 31, 2008 was 15%. For the nine month period, the segment has been able to sustain its margins at the same level as realized during the corresponding period most part of this period. This was possible due to suitable escalation clauses in a majority of its contracts with the customers, and on-time execution of the projects.
The segment posted revenue of Rs. 647 crore for the quarter, marginally exceeding its revenue for the corresponding quarter of the previous year. This was achieved despite a severe credit crunch and deferment of expenditure by the Building and Industrial sectors, which adversely impacted the demand for the segment’s products and services. Export efforts were stepped up during the quarter to supplement the sluggish domestic demand, boosting the share of international sales of 18%. The segment profitability for the quarter was under strain due to lower volume, under-utilization of capacity and competitive pressures prohibiting higher price realization.
The Segment reported a drop in revenue at Rs. 529 crore for the quarter ended December 31, 2008 severely impacted by a sharp drop in capital expenditure by the Indian Industry, especially the construction sector. Low fund availability in the hands of the prospective customers worsened the situation. The segment also saw a drop in margins primarily due to squeeze on end-product prices and under-recovery of the fixed costs. The performance of the segment on the export front was encouraging with exports touching 23% of its total revenue for the quarter.
The Indian economy is going through a challenging phase during the current financial year. While the year began with a spurt in oil prices and high inflationary conditions, the current trend indicates a slowdown in the economy. Despite the best efforts of the government to shore up the investment climate, the capital goods industry is expected to grapple with the impact of slowdown, which is likely to continue through 2009-10.
The company is constantly assessing the emerging developments in the country and aboard, and monitoring their impact on its growth strategy in the medium term. The company’s foray into the new Railway business has resulted in a few important order inflows, with more prospects on the anvil. Its renewed venture into Power business also holds significant potential. Its current initiatives on building a business opportunity in the nuclear power sector are unlikely to bear fruit over the longer term.
In the near term, the Company expects to meet its growth projections backed by a healthy Order Book.
