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L&T: A strong quarter

Oct 19, 2013

Larsen & Toubro (L&T) has announced its second quarter results of financial year 2013-2014 (2QFY14). The company has reported a 10% YoY growth in sales while net profits have declined by 14% YoY. Here is our analysis of the results post conference call with the management.

Performance summary
  • Standalone net sales for the company grew by 10.0% YoY during 2QFY14.
  • Total operating expenses for the company increased by 11.2% YoY. While raw material cost as a percentage of sales declined from 68.1% in 2QFY13 to 65.7% in 2QFY14; there was an increase in other manufacturing costs as well as staff costs.
  • The increase in manufacturing costs was a result of higher input cost due to rupee depreciation, competitive pressure and lower level of utilization in some of the business segments. Consequently, operating profit growth (in absolute terms) was flat in 2QFY14 with 0.9% YoY decline in margin to 9.7% during the period.
  • Net profit declined by 14% YoY during the quarter due to the flat performance at the operating level. 2QFY13 also had exceptional (before tax) and extraordinary gains of Rs 2.6 bn. On excluding these non-recurring items; recurring net profits have actually grown by 7% YoY in the current quarter. Other income grew by 35.7% YoY which contributed to the profit growth in 2QFY14.

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