The Hindu Business Line : L&T beats rising prices to take net up 38%; bonus set at 1:1

Mumbai, May 29 Larsen & Toubro’s net profit for the fourth quarter of fiscal 2008 rose 38 per cent as its engineering and construction division reported both higher revenues and margins, despite an adverse quarter of rising prices.

Its E&C division, which accounts for more than three quarters of the company’s revenues, reported an operating margin of 15.7 per cent for the quarter, against 14.7 per cent a year ago. For fiscal 08, its operating margin was 1.3 percentage points higher.

Quarterly and yearly margins were higher on account of the company’s policy on taking on new jobs, 60 per cent of which are now being contracted on a cost-plus basis, said Mr A. M. Naik, Chairman & Managing Director.

This took care of the cost increases in steel, cement and other input items. Judicious selection of orders and timely execution of jobs also pumped up margins, said Mr Y. M. Deosthalee, Chief Financial Officer.

The operating margin as a whole for fiscal 08 was a full percentage point higher, at 13.6 per cent (12.6 per cent). This even after taking into account the mark-to-market losses of Rs 171 crore which has been charged to the profit and loss account as per new accounting requirements, said Mr Deosthalee. There was a one-time gain of Rs. 87.23 crore during the quarter and the year, from disposal of a stake in one of the subsidiaries.

Revenues from international operations constituted 16.4 per cent of gross revenues. Margins from both domestic and international projects are now on a par, said Mr Naik.

The order book position rose 37 per cent from a year ago; it currently stands at over Rs 53,000 crore. The company hopes to end the current fiscal with the position at Rs 60,000 crore, said Mr Naik.

Outlook positive

Despite fears of a slowdown, and of a further hike in input costs, Mr Naik said the company’s outlook for the current fiscal would remain positive; orders would grow 35 per cent and profits 30 per cent.

This was because the company had reorganised itself into 15 operating units and 3 subsidiaries, and was fairly well hedged against slowdowns in any one sector, he added. Add to this, its operations in the Middle East, where construction is booming and the fact that the company’s operations in infrastructure are an area of government priority domestically.

L&T’s Board recommended a final dividend of Rs 15 on each share of face value Rs 2, as well as a bonus issue of one free share for every share held.

The announcement of the bonus issue sent the stock soaring . In a declining market, the scrip of face value Rs 2 closed on the NSE at Rs 2,882.25, up 6.4 per cent from Wednesday’s Rs 2,708.25.