L&T beats recession, posts 62% rise in profit

MUMBAI, JAN 25: Engineering giant Larsen & Toubro has broken new ground in the recession-roiled engineering industry with a whopping ...

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MUMBAI, JAN 25: Engineering giant Larsen & Toubro has broken new ground in the recession-roiled engineering industry with a whopping 62 per cent rise in net profit to Rs 63.56 crore during the third quarter ended December 1998. Driven by higher volumes, the company’s profit before tax zoomed to Rs 69.96 crore, up from Rs 43.27 crore in the corresponding quarter last year.

Despite an "unprecedented" slowdown in the economy, the company’s net income from operations shot up 42.34 per cent to Rs 1,789.26 crore, from Rs 1256.98 crore in the same period of 1997-98, while other income increased from Rs 12.59 crore to Rs 19.53 crore during the period.

"The performance of the company is highly commendable against the backdrop of the unprecedented slowdown in the economy. There is hardly any investment in the industrial sector and investment in the infrastructure sector is taking off very slowly," L&T said in a release.

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The company’s operating margins, however, dipped from 9.11 per cent to 8.3 per cent in thethird quarter. Company officials clarified that the operating margins were maintained at last year’s levels. "Except for cement, margins in other businesses were at last year’s levels. The decline, as it appears from the figures, does not give the true picture as it does not take into account projects which are far from being completed," said a company official.

Net profit during the first nine months of the current fiscal, however, registered a modest 8.3 per cent increase to Rs 262.27 crore, while profit before tax inched up from Rs 270.13 crore to Rs 290.27 crore during the period. Net sales during the first three quarters shot up 26 per cent to Rs 4,882.21 crore, while other income increased from Rs 46 crore to Rs 58.54 crore during the period.

Total expenditure during the first nine months increased to Rs 4,428.67 crore, from Rs 3,433.88 crore last year. For the third quarter, total expenditure rose to Rs 1,640.34 crore from Rs 1,145.23 crore in the same period last year.

"The cement industrycontinues to be in a very difficult situation. As a result of excess supply in certain markets and substantial drop in export realisation, the margins are under pressure," L&T has said in a release. The company commenced commercial production at its 2 million tonne greenfield cement unit in Andhra Pradesh, and cement and clinker sales shot up 39 per cent over the same period last year. L&T has also announced that it is taking over management control of Narmada Cement, which will hike its cement capacity to 12 million tonnes.

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The company’s order booking for the current fiscal was 8 per cent higher at Rs 5,252 crore, as compared to the same period last fiscal. The order backlog at Rs 6,099 crore as on December 31, 1998 was also higher by a similar margin.

The major orders booked by L&T in the current fiscal include the Rs 655 crore DHDS project orders from Hindustan Petroleum, Indian Oil and Cochin Refineries, the Rs 220 crore Tirupur water supply project for Mahindra Infrastructure, the Rs 135 crore powerplant construction project at Pillaiperumal (Tamil Nadu), and a Rs 106 crore equipment order for Petronas, Malaysia.

Apart from its traditional areas, L&T is making a major thrust in oil and gas, power plant equipment/projects and infrastructure areas. L&T is currently executing power plant orders from Haldia Petrochemicals, IPCL, Usha Martin, while in the field of infrastructure it is executing bridge and bypass projects on build-own-operate (BOO) and build-operate-transfer (BOT) basis.