Net income from operations shot up 42.34 per cent to Rs 1,789.26 crore from Rs 1,256.98 crore in the same period of 1997-98, while other income increased from Rs 12.59 crore to Rs 19.53 crore. At the BSE, the L&T stock closed marginally higher at Rs 188.10 as the results came in after the day's trading session. "The performance of the company is highly commendable against the backdrop of the unprecedented slowdown in the economy. There is hardly any investment in the industrial sector and investment in the infrastructure sector is taking off very slowly," L&T said in a release.

The company's operating margins, however, dipped from 9.11 per cent to 8.3 percent in the third quarter. Company officials clarified that these were maintained at last year's levels. "Except for cement, margins in other businesses were at last year's levels. The decline, as it appears from the figures, does not give the true picture as it does not take into account projects which are far from being completed," said a company official.

Net profit during the first nine months of the current fiscal, however, registered a modest 8.3 per cent increase to Rs 262.27 crore, while profit before tax inched up from Rs 270.13 crore to Rs 290.27 crore during the period.

Net sales during the first three quarters shot up 26 per cent to Rs 4,882.21 crore, while other income increased from Rs 46 crore to Rs 58.54 crore during the period.

Total expenditure during the first nine months increased to Rs 4,428.67 crore from Rs 3,433.88 crore last year. For the third quarter, total expenditure rose to Rs 1,640.34 crore from Rs 1,145.23 crore in the same period last year.

"The cement industrycontinues to be in a very difficult situation. As a result of excess supply in certain markets and substantial drop in export realisation, the margins are under pressure," L&T said in its release.

The company commenced commercial production at its 2-million-tonne greenfield cement unit in Andhra Pradesh and cement and clinker sales shot up 39 per cent over the same period last year. L&T has recently announced its acquisition of Narmada Cement which will hike its cement capacity to 12 million tonnes.

The company's order booking for the current fiscal was 8 per cent higher at Rs 5,252 crore. The order backlog at Rs 6,099 crore as on December 31, 1998, was also higher by a similar margin. The major orders in the current fiscal include the Rs 655-crore DHDS project orders from Hindustan Petroleum, Indian Oil and Cochin Refineries, the Rs 220-crore Tirupur water supply project for Mahindra Infrastructure, the Rs 135-crore power plant construction project at Pillaiperumal (Tamil Nadu), and a Rs 106-croreequipment order for Petronas, Malaysia. Apart from its traditional areas, L&T is making a major thrust in oil and gas, power plant equipment/projects and infrastructure areas. It is currently executing power plant orders from Haldia Petrochemicals, IPCL and Usha Martin, while in the field of infrastructure it is executing bridge and bypass projects on build-own-operate (BOO) and build-operate-transfer (BOT) basis.

Insight

Market fails to respond
The margins in L&T's cement business were under pressure, but better in EPC. The firm follows the percentage of completion method. Revenue is not recognised till the specified stage of completion of the contract and allowance is made for calculating profit. For any EPC contractor, the last quarter is the best one. The topline growth will be reflected in bottomline only three months hence. The last quarter will also be better for cement as prices in Mumbai are ruling at Rs 165 per bag and in the south prices will be better than the low thirdquarter prices due to monsoon. The better than expected result is yet to be reflected in the price of the scrip.