Larsen & Toubro Q2 FY15 Results

• Order inflow up 17%

• Revenue grows by 10%

• PAT increases by 7%

Larsen & Toubro recorded Consolidated Gross Revenue of  Rs 21331 crore for the quarter ended September 30, 2014, registering a y-o-y growth of 10.4%. The International revenue during the quarter at Rs 6562 crore constituted 31% of the total revenue. The Consolidated Gross Revenue for the half-year ended September 30, 2014 stood at Rs 40454 crore and increased by 10.1% on y-o-y basis.

The Company successfully secured fresh orders worth `Rs 39797 crore at consolidated level during the quarter ended September 30, 2014, registering a smart y-o-y increase  of 17 %, sustaining the growth momentum in the first half of the current year. The International order inflow during the quarter at Rs 6756 crore constituted 17% of the total order inflow. Major orders during the quarter were secured by the Infrastructure, Power and Hydrocarbon segments.

On a cumulative basis, the order inflow for the half-year ended September 30, 2014 stood at Rs. 73205 crore, registering a y-o-y growth of 14 % on a large base. The International order inflow constituted 29% of the total order inflow for the half year.

Consolidated Order Book of the group stood at Rs 214429 crore as at September 30, 2014, higher by 14% on a y-o-y basis. International Order Book constituted 27% of the total Order Book. The Consolidated Profit after Tax (PAT) for the quarter July to September 2014 at Rs 862 crore recorded a growth of 7% over the corresponding quarter of the previous year. For the half-year ended September 30, 2014 the PAT at Rs 1829 crore registered an impressive growth of 45% on a y-o-y basis on the back of divestment gains.

Infrastructure Segment

Infrastructure Segment achieved Customer Revenue of  Rs 9633 crore for the quarter ended September 30, 2014 registering a healthy y-o-y growth of 27%, driven by surge in the execution by all the businesses of the segment. International sales constituted 27% of the total customer revenue of the segment during the quarter.

Infrastructure Segment secured fresh orders at  Rs 19236 crore consistently during the second quarter of the year vis-à-vis a large base of order inflow of Rs 21080 crore recorded in the corresponding quarter of the previous year, which included one big-size international order. The order inflow during the quarter mainly emanated from Buildings & Factories, Transportation Infrastructure, Power Transmission & Distribution and Water & Renewable Energy businesses. International orders contributed to around 16% of the total order inflow of the segment during the quarter.

The Order Book of the Segment grew 16% on a y-o-y basis and stood at Rs  146634 crore as at September 30, 2014. The segment recorded EBIDTA margin at 10.1% during the quarter ended September 30, 2014 with larger proportion of jobs at early stage of execution, yet to achieve the margin recognition threshold. The segment had recorded margin of 12.3% in the corresponding quarter of the previous year on the back of realization of a large customer claim.

Power Segment

Power Segment recorded customer revenue of Rs 1153 crore during the  quarter ended September 30, 2014, registering a reduction of 20% over the corresponding quarter of the previous year due to low opening order book and majority of the newly secured orders being at initial stages of execution.

Power Segment secured fresh orders of Rs 7706 crore for the quarter ended September 30, 2014, as against  Rs 607 crore secured in the corresponding quarter of the previous year on the back of large size domestic orders bagged by the segment.

The Order Book of the Segment grew 41% on a y-o-y basis and stood at Rs 23293 crore as at September 30, 2014.

The segment EBIDTA margin stood at 13.2% for the quarter ended September 30, 2014 vis-à-vis 32.6% recorded in the corresponding quarter of the previous year, which included higher realization of margins on jobs nearing completion.

Metallurgical & Material Handling (MMH) Segment

The Customer Revenue of MMH Segment during the quarter ended September 30, 2014 at Rs 778 crore registered a y-o-y decrease of 32%, on account of lower opening order book and delay in receipt of new orders.

MMH Segment secured fresh orders of Rs 2173 crore during the quarter ended September 30, 2014, compared to inflows of Rs 896 crore during the corresponding quarter of the previous year.

The Order Book of the Segment declined by 30% on a y-o-y basis and stood at Rs 10766 crore as at September 30, 2014.

The EBIDTA margin of the segment declined to 9.2% for the quarter ended September 30, 2014 vis-à-vis 16.1% recorded in the corresponding quarter of the previous year

Heavy Engineering Segment

Heavy Engineering Segment achieved Customer Revenue of Rs 810 crore for the quarter ended September 30, 2014, registering an y-o-y decline of 21% over the corresponding quarter of the previous year mainly on account of delayed order inflow and low order book. International sales constituted 29% of the total customer revenue of the segment Heavy Engineering Segment secured fresh orders valued Rs 606 crore, during the quarter ended September 30, 2014, registering a y-o-y decline of 38%. International orders constituted 58% of the total order inflow of the segment.

The Order Book of the Segment stood at Rs 8372 crore as at September 30, 2014. The EBIDTA margin of the segment stood at 12.8% for the quarter ended September 30, 2014 vis-à-vis 14.9% recorded in the corresponding quarter of the previous year

Electrical & Automation (E&A) Segment

E&A Segment recorded Customer Revenue of Rs 1213 crore during the quarter ended September 30, 2014, registering a modest growth of 3% on y-o-y basis. International sales constituted 32% of the total customer revenue of the segment for the quarter ended September 30, 2014.

The EBIDTA Margin of the E&A Segment at 13.7% for the quarter ended September 30, 2014 recorded an improvement over the 11.5% earned during the corresponding quarter of the previous year due to reduction in input prices.

Hydrocarbon Segment

Hydrocarbon Segment achieved Customer Revenue of  Rs 1804 crore registering a y-o-y decline of 24% over the corresponding quarter of the previous year mainly on account of low opening order book and deferment of project awards. International sales constituted 61% of the total customer revenue of the segment for the quarter ended September 30, 2014.

Hydrocarbon Segment secured fresh orders valued Rs 2536 crore, during the quarter ended September 30, 2014, registering a decline of 40% as compared to the corresponding quarter of the previous year. International orders constituted 21% of the total order inflow of the segment.

The Order Book of the Segment grew 19% on a y-o-y basis and stood at Rs 15359 crore as at September 30, 2014.

The EBIDTA margin of the segment was negative for the quarter ended September 30, 2014 vis-à-vis positive margin of 8.7% recorded in the corresponding quarter of the previous year. The negative EBIDTA was on account of cost overrun on jobs nearing completion and under recovery of overheads.

IT & Technology Services Segment

IT & Technology Services Segment recorded Customer Revenue of Rs 1854 crore duringthe quarter ended September 30, 2014, registering a y-o-y growth of 14%.International sales constituted 96% of the total customer revenue of the segment for the quarter ended September 30, 2014.

The EBIDTA Margin of the IT&TS Segment at 18.6% for the quarter ended September 30, 2014 recorded a decline vis-à-vis 22.6% earned during the corresponding quarter of the previous year due to relatively higher operating cost.

Developmental Projects Segment

Developmental Projects Segment recorded Customer Revenue of Rs. 993 crore during the quarter ended September 30, 2014, registering a substantial y-o-y growth. During the quarter, the Company commissioned the second unit of Rajpura Power Plant contributing significantly to the revenue growth.

The EBIDTA Margin of the Developmental Projects Segment for the quarter ended September 30, 2014 stood at 16.0%.

Financial Services Segment

Financial Services Segment recorded Customer Revenue of  Rs 1604 crore during the quarter ended September 30, 2014, registering a y-o-y growth of 27%, driven by growth in loan book and disbursements.

The operating margin of the Financial Services Segment for the quarter ended September 30, 2014 at 15.8% increased over 15.2% earned during the corresponding quarter of the previous period.

“Others” Segment

“Others” segment comprises Realty, Shipbuilding, Construction & Mining Equipment and Industrial Machinery & Product businesses.Customer Revenue of “Others” Segment during the quarter ended September 30, 2014 stood at Rs 1489 crore registering a growth of 5% over the corresponding quarter of the previous year led by Shipbuilding and Valves businesses. International sales constituted 23% of the total customer revenue of the segment.

During the quarter ended September 30, 2014, the segment EBIDTA margin improved to 19.0% as compared to negative margin of 7.0% during the corresponding quarter of the previous year consequent to lower losses in the Shipbuilding business.

Outlook

The domestic business sentiment has improved on the high expectations from the new government for reviving the growth momentum. Improving macro economic conditions on the back of stable currency rates, soft oil & other commodity prices have encouraged investment interests in the country. Decontrol of diesel prices, the ordinance for coal block e-auctioning, liberalized FDI norms in construction sector evidence the commitment of the government to stimulate growth through much needed reforms. De-bottlenecking of incomplete infrastructure projects, enabling credit growth and domestic manufacturing appear to be the initial thrust areas. Large green field investments in core sectors, however, are expected to take a few more quarters.

While continuing to pursue international business on selective basis, the Company with its capabilities spanning across several core sectors, is poised to grow its domestic order book and maintain its leadership position as the opportunities emerge.

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Background:

Larsen & Toubro is a USD 14.3 billion technology, engineering, construction, manufacturing and financial services conglomerate, with global operations. Its products and systems are marketed in over 30 countries worldwide. L&T is one of the largest and most respected companies in India’s private sector. A strong, customer–focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business over seven decades.