The Hindu Business Line : L&T fourth quarter net up 16.6%

Mr A. M. Naik, Chairman & Managing Director, Larsen & Toubro Ltd (right), and Mr Y.M. Deosthalee, Director & Chief Financial Officer, announcing the results in Mumbai on Friday. -- Shashi Ashiwal

Mumbai , May 27

LARSEN & Toubro has reported a 16.6 per cent increase in net profit for the fourth quarter ended March 31, 2005.

This is on a 20 per cent increase in total revenues during the period.

Net profit for the quarter amounted to Rs 333.68 crore as against Rs 286.16 crore during the corresponding year-ago quarter.

Gross sales stood at Rs 4,308 crore, up from Rs 3,587 crore.

Profit after tax for fiscal 2004-05 amounted to Rs 983.9 crore, including income of Rs 353 crore from sale of shares in UltraTech Cement Ltd.

Discounting this one-time income, net profit for the year rose 18 per cent, up from Rs 532.75 crore the previous year. This increase is despite a squeeze in profit margins.

"Higher commodity prices during the last year squeezed our profit margins on fixed price contracts entered into earlier," said Mr A.M. Naik, Chairman & Managing Director, L&T, at a news briefing here on Friday.

"Also, as the company enters new world geographies, our competitive entry pricing would bring down average profit margins. This will correct itself in a few years time."

Gross sales at Rs 13,269 crore, rose 35 per cent during the year, up from Rs 9,807 crore.

Total expenditure rose to Rs 12,373 crore, up from Rs 9,116 crore. Raw material costs were the largest component of increased expenditure, amounting to Rs 4,476 crore (Rs 2,744 crore last year).

Borrowing increased during the year, with net interest expenses at Rs 54 crore (Rs 37 crore). But the borrowing cost was lower by 1.6 per cent over the year, said a statement from the company.

Provision for current tax was higher at Rs 321 crore (Rs 281 crore), largely due to higher level of net earnings and phasing out of various tax incentives provided earlier by the Government.

The company has announced a dividend of Rs 17.50 per equity share of face value Rs 2. This excludes an earlier special dividend of Rs 10 per share. Total annual dividend is Rs 27.5 a share, or 1375 per cent.

The largest contributor to revenues, the engineering and construction segment booked new orders of Rs 13,301 crore during the year, which was 14 per cent higher over the previous year.

Exports accounted for 19 per cent of the revenues for the year, amounting to over Rs 2,500 crore. This is expected to grow to around 25 per cent of revenues over a few years, said Mr Naik.

The order backlog position as at the end of 2004-2005 was 7 per cent higher, and orders received at Rs 14,400 crore, 10 per cent higher over the previous year. This could increase by as much as 20 per cent during the current year, said a company official.

The defence sector, which contributed over 3 per cent of revenues, is expected to account for 10 per cent of revenues in the long term. The company is preparing itself operationally for this, although the Union Government is yet to privatise defence production in a big way, said Mr Naik.

L&T to set up engg centre in Abu Dhabi

LARSEN & Toubro has plans to set up an engineering centre in Abu Dhabi, so as to be closer to the growth market that the company has identified for itself.

Another engineering centre is planned in Delhi as well.

With oil prices being what they are, West Asia is booming and building huge capabilities, said Mr Naik.

Orders in the region of $ 50 billion are expected to be made annually by six or seven countries in the Gulf region, excluding Iran and Iraq, he said.

For L&T, which has identified West Asia as its prime area of concentration, internationally speaking, it would be worth establishing its presence closer to its customers.

In addition, this could somewhat stem the engineering talent that is already flowing to West Asia out of India, in view of the enormous work and opportunities there. For starters, around 100 people would be hired for the L&T's Abu Dhabi centre, said an official.

L&T's risk management committee has cleared orders up to $ 200 million that may be handled by the company on its own. For orders larger than this, L&T would have to tie up with other companies and be a joint bidder, he said.

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