Engineering conglomerate Larsen & Toubro has put the sluggish order picture of last fiscal well behind it. New orders in the September 2012 quarter rose 30 per cent over the year-ago period. This is close on the heels of a 21 per cent increase in fresh orders in the June 2012 quarter.
Strong execution helped a 17 per cent increase in net sales. Net profits, adjusted for one-off items, grew 15 per cent.
Infrastructure to the fore
The infrastructure segment has driven this growth, with half the new orders in this segment. The first half of the previous fiscal saw a far greater share of power and hydrocarbon orders, with the infrastructure segment snagging only 40 per cent of new orders. Power equipment orders weakened in the September quarter, as did export orders.
L&T saw the urban infrastructure and water segments gather steam. With L&T now going slow on bidding for road development projects, these segments could buoy future order inflows. The company is still taking on pure construction contracts in the road space, ensuring that it does not miss out on the opportunities there. Weak industrial demand still weighs on L&T’s capital goods business.
Higher sub-contracting
Input costs as a proportion of sales dropped three percentage points to 43 per cent in the September quarter compared to a year ago, on better inventory control. But it was matched by a spike in sub-contracting costs, which surged to 22 per cent of sales against the 16 per cent in the year-ago period. Operating margins stayed put at 10.4 per cent.
This, though, is an improvement over the June 2012 quarter, when high input and staff costs helped shave three percentage points off margins.