InvestorQ : Why did L&T report a fall in net profits in the Dec-21 quarter?
Lavanya Subramanian made post

Why did L&T report a fall in net profits in the Dec-21 quarter?

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Anamika Sodhani answered.
4 months ago
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Larsen & Toubro managed to report robust sales numbers for the Dec-21 quarter on the back of strong infrastructure demand. However, the spike in construction costs and higher material costs and supply chain constraints put pressure on the profits. IT and technology came as a saviour for L&T. Here is the L&T financials summarized.

Larsen & Toubro

Rs in Crore

Dec-21

Dec-20

YOY

Sep-21

QOQ

Total Income (Rs cr)

₹ 39,563

₹ 35,596

11.14%

₹ 34,773

13.78%

EBITDA (Rs cr)

₹ 3,798

₹ 3,578

6.15%

₹ 3,266

16.28%

Net Profit (Rs cr)

₹ 2,055

₹ 2,467

-16.70%

₹ 1,819

12.93%

Diluted EPS (Rs)

₹ 14.61

₹ 17.55

₹ 12.94

EBITDA Margin

9.60%

10.05%

9.39%

Net Margins

5.19%

6.93%

5.23%

Larsen & Toubro reported 11.14% higher sales revenues at Rs.39,563 crore for the December 2021 quarter. The company witnessed strong revenue growth traction across infrastructure vertical, hydrocarbons vertical and the IT and technology verticals. However, heavy engineering and the defence engineering businesses saw weaker revenues du eto tepid order flows and weak execution.

The overall order book of L&T currently stands at a record level of Rs.340,365 crore, which is the highest order book ever achieved by L&T. During the quarter, L&T bagged orders worth Rs.50,359 crore afresh during the Dec21 quarter. Short term momentum was also favourable on the counter as is evident from the sequential sales performance. On a sequential basis, the revenues were up by 13.78% for L&T.

Operating profits were up 6.15% at Rs.3,798 crore for the Dec-21 quarter. EBIT growth strong across the infrastructure vertical and IT/Technology verticals. However, EBIT growth faltered in the hydrocarbons vertical, heavy engineering vertical and the defence engineering vertical. A sharp spike in construction costs and construction material costs had an impact of muting the operating profit growth in the quarter.

Operating margins fell from 10.05% in Dec-20 quarter to 9.60% in Dec-21 quarter due to weak growth in operating profits as compared to sales. The net profits took a sharp hit of -16.7% yoy at Rs.2,055 crore. Apart from cost pressures, the fall was also due to exceptional gains of Rs.209 crore that L&T had reported in the Dec-20 quarter as the gains received from the sale of discontinued operations of the electrical goods business net of tax.

PAT margins fell from 6.93% in the Dec-20 quarter to 5.19% in the Dec-21 quarter but were just marginally lower by 4 basis points on sequential basis.

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