Larsen & Toubro sees challenging times ahead but is confident of meeting its 2011-12 forecast for revenue, order growth and margin, said the $11.7 billion-engineering conglomerate on Monday.
"There is a lot of volatility in the market, decision making process is slow, and interest rates are hardening. Even after considering these factors, we are comfortable in maintaining our guidance," Chief Financial Officer Y M Deosthalee told reporters.
The company had earlier given a guidance of 25% for revenue growth and 15-20% for order inflow. It sees its operating margin at FY11 levels of 12.80% with a negative bias of 0.50-0.75%. L&T reported a net profit of Rs 746 crore in the first quarter of 2011-12, up 12% year-on-year, driven by a pick up in order execution.
The company's net sales rose 21% to Rs 9,483 crore. A Bloomberg poll of 12 analysts had pegged company's net profit at Rs 740 crore and sales at Rs 9,580 crore for the quarter ended June. Shares of the company recovered from the day's low after the company reported numbers in line with street estimate.
They later ended at Rs 1,629.85 a share on the Bombay Stock Exchange, down 0.6% from Friday. BSE's benchmark Sensex ended down almost 2% at 16,990. All three of the company's key verticals, engineering and construction, electrical and electronics, and machinery and industrial products, reported a rise in sales despite sluggish investment.
However, operating margin remained under pressure due to higher input cost, staff cost and competitive pressure weighed. The company operating margin slipped to 11.9% in April-June from 12.8% a year ago.
"Certain high value engineering and construction projects are yet to reach the threshold level of margin recognition and hence, could not contribute to the operating margin during the quarter," said R Shankar Raman, senior vice president (finance). Order inflow in the June quarter remained muted with the company reporting fresh orders worth Rs 16,190 crore, up only 4%.
The order book stood at Rs 136,172 crore as on June-end, as against Rs 107,816 crore a year ago.
"Order inflow has been reassuring in the quarter, much higher than what we had budgeted," Deosthalee said.
SHANKAR RAMAN NEW CFO OF L&T
L&T will appoint R Shankar Raman, vice-president (finance) as the Chief Financial Officer on September 6 after Y M Deosthalee moves on to head L&T Finance Holdings. L&T is also looking for a successor to Chairman and Managing Director, AM Naik, who retires in September next year. Deosthalee, who spearheaded the engineering company's foray into financial services, would move to L&T Finance Holdings.
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