L&T Q1 net down 12.5%, stock slumps as co misses estimates

Larsen & Toubro Ltd, India’s biggest engineering and construction group, posted a surprise drop in its fiscal first-quarter net profit as a weak domestic economy hit spending on infrastructure projects.

L&T shares fell sharply after the company said earnings slumped 12.5 percent in the June quarter from a year earlier. The stock was trading down 6.87 percent in a firm Mumbai market as of 2.24 p.m.

Net profit fell to Rs 756 crore from Rs 864 crore a year earlier, said L&T, which builds roads and develops real estate whilenet sales rose just 5 per cent toRs.12,555 crore, L&T said.

Analysts expected L&T, which also makes equipment for power plants and constructs ships, to post a net profit of Rs 950 crore.

“The PAT during the quarter was impacted on account of job mix, lower margin accruals and lower other income,” the company said in a statement.

The company, however, reported a 28% increase in order inflows to Rs 25159 crore.Order book as on June 30 stood at Rs 1.65 lakh crore.

During the quarter, the firm saw 53 percent orders from the private sector and 35 percent from the public sector.

Larsen & Toubro debt as of June 30,2013 stood at Rs 11,000 crore.

The company said it will continue to focus on West Asia, Africa, South Asian markets. It also said that EBITDA margins had shrunk due to industry pressures and they will not be revising its FY14 guidance.

“L&T numbers are lower than our expectations. Notwithstanding, the disappointing numbers, on a long term basis, we continue to be positive on the company,” saidSanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.

Despite the disappointing earnings, the company is confident of meeting full year sales and its margins guidance for FY14. It expects order momentum from international markets to be robust.

L&T has been looking to boost its overseas sales as the soft Indian economy, growing at its slowest pace in a decade, hit infrastructure building in India. It hopes to see better sales realisations by the second half of FY14 and plans on concentrating on international orders to offset the slowdown in India.

ArcelorMittal SA , the world’s top steelmaker, and South Korea’s POSCO last week scrapped plans to build two steel plants in India, underscoring the obstacles that large projects face in the country.

With inputs from Reuters