L&T adjusted profit climbs 56% in Q2 as order inflows rise, margins improve

Larsen & Toubro Ltd registered a sharp jump in adjusted profit for the second quarter, helped by higher sales and an improvement in earnings margins across some of its key businesses.

India’s biggest engineering and construction company said adjusted consolidated profit after tax rose 56% from a year earlier to Rs 1,723 crore for the three months through September. Adjusted profit excludes exceptional items and discontinued operations.

After including one-off items, consolidated net profit for the second quarter slumped 67% to Rs 1,819 crore from Rs 5,520 crore during the year-ago period, when it recorded a gain on the sale of its electrical and automation business to French company Schneider Electric.

L&T said the adjusted profit was driven by higher earnings of its software services business and improved margins from the projects and manufacturing portfolio as the coronavirus-induced stress in previous periods waned.

L&T also said that revenue from operations rose 12% to Rs 34,772 crore from Rs 31,034 crore in the corresponding quarter of last year. 

The company said it recorded a rebound in orders during the July-September period. During the second quarter, it bagged orders worth Rs 42,140 crore. This is 50% more than the figure it had clocked in the same period last year.

The EBITDA margin of the infrastructure segment, the biggest revenue generator for L&T, widened to 8.3% during the quarter ended September 30, 2021 from 6.4% a year earlier.

The EBITDA margin of the IT and technology services business, the second-biggest contributor to total revenue, expanded marginally to 23.3% from 23.2.%.

The hydrocarbon segment’s EBITDA margin narrowed a little, to 8.3% from 8.5%, but it secured orders valued at Rs 14,503 crore during the second quarter compared with just Rs 99 crore a year earlier.

L&T Q2: Other highlights

1) Consolidated order book at the end of the September was Rs 3.3 lakh crore, of which 23% was from overseas.

2) During Q2, 52% of the orders were international. Those amounted to Rs 22,116 crore.

3) Infrastructure segment received orders worth Rs 12,108 crore in Q2, down 17% over the year-ago period.

4) Power segment recorded order inflow of Rs 143 crore, reflecting stagnation of fossil fuel power plant prospects.

5) The heavy engineering segment recorded order inflow of Rs 648 crore, up 101%.

6) The IT and technology services business recorded customer revenue of Rs 7,876 crore, up 28%.

L&T commentary

The company said that with the progressive weakening of the second Covid-19 wave and sustained vaccination efforts, the overall business environment is looking more positive and that this should lead to the Indian economy registering good growth in the medium term. 

“Various high frequency indicators such as GST collections, auto sales, power consumption, import-export data indicate a sustained economic recovery,” L&T said. 

The engineering company said its focus remained on profitably executing its large projects, even as it looks to take advantage of the tailwinds and growth momentum in sectors such as IT. 

L&T also said that it is looking to optimise costs by automation and greater use of digital technologies, even as it looks to divest non-core assets in a phased manner and improve its working capital management.