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L&T: Interest cost hurt profits
May 22, 2013

Larsen & Toubro (L&T) has announced the fourth quarter and full year results of financial year 2012-2013 (4QFY13). The company has reported 9.9% YoY growth in sales while net profits have declined 6.9% YoY. Here is our analysis of the results.

Performance summary
  • Standalone net sales grow by 9.9% YoY during 4QFY13. Revenue growth was driven by 9.5% YoY growth in the Engineering & Construction (E&C) business. The Machinery & Industrial products (M&I) division also grew at a healthy pace of 9.3% YoY.
  • Operating profits decline 4.3% YoY in 4QFY13 due to increase in material expenses. In line with profits, operating margins too declined to 12.1% in 4QFY13 from 13.9% in 4QFY12.
  • Net profits declined by 6.9% YoY during the quarter due to poor performance at the operating level and increase in interest cost by 132.1% YoY. Interest expenses increased due to rising cost of debt and increased level of borrowings.
  • The company registered an order inflow of Rs 279.2 bn during the quarter, a growth of 32% YoY. For the full year, the order inflow stood at Rs 880 bn, a growth of 25% YoY. The total order book at the end of the year stood at Rs 1,536 bn. 49% of the backlog belongs to the infrastructure sector while 28% belongs to the power sector.
  • The board of directors has recommended a dividend of Rs 18.5 per share for the year under consideration.
  • The board of directors has also recommended a bonus issue of 1:2; i.e one equity share for every two shares held.
  • The standalone debt/equity ratio of the company stood at 0.3x at the end of the year.

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