L&T net profit crashes 76 pc to Rs 19 cr

L&T net profit crashes 76 pc to Rs 19 cr
ENS ECONOMIC BUREAU

Mumbai, July 21: Larsen & Toubro, the diversified congolmerate, has posted disastrous quarterly results with net profit during the three-month period ended June 2000 plunging by 76 per cent to Rs 18.88 crore from Rs 79.25 crore last year.

Profit before tax fell steeply from Rs 88.85 crore to Rs 20.58 crore, while gross profit dipped from Rs 238.45 crore to Rs 179.43 crore during the period. Earnings per share nosedived from Rs 3.19 to Rs 0.76.

Sales and service income, however, rose by a modest four per cent to Rs 1,663.36 crore from Rs 1,591.85 crore during the same period last year. Other income, which more than doubled from Rs 15.74 crore to Rs 32.61 crore during the period, saved the day for L&T, as profits would have otherwise dwindled further.

"The performance reflects pressure on sales realisation in the cement business, the impact of shutdown in the company's Nashik glass works and the early stage of completion of jobs in the engineering and construction segment," L&T said in a statement.

At the Bombay Stock Exchange, the L&T stock closed at Rs 202.15 after touching an intra-day high of Rs 212.50.

Average realisation from its cement business, which accounted for 33 per cent of its overall sales turnover, dipped by Rs 80 per tonne compared to the April-June period last year. "Despite significant improvement in operating parameters, the performance of the business was adversely affected by lower sales realisation and to some extent by the increase in fuel cost," the company said.

Analysts say L&T's results show that the decline in realisation for its cement business has been steeper than the dip in industry realisation during the first quarter, as prices were lower by only around 4 per cent during the period.

Interest charges during the first quarter remained almost unchanged at Rs 83.76 crore, while provision for depreciation rose from Rs 65.89 crore to Rs 75.09 crore during the period. Sales, administration and other expenses shot up to Rs 171.09 crore from Rs 145.71 crore. Provision for taxation stood at Rs 1.72 crore, as against Rs 9.60 crore last year.

The E&C business, which accounts for 53 per cent of the company's turnover, has been hit by "sluggish" investments, although L&T is hopeful that "the order position will improve in the coming months."

"A significant part of its sales relating to the E&C segment is valued at cost in line with the company's accounting policy, since the jobs have not reached the threshold level of completion for profit recognition," the company has said.

L&T has appointed JP Morgan and DSP Merrill Lynch as financial advisors for the demerger of its cement business, which was cleared recently by the company's board.

The investment bankers will assist and advise the company top brass on matters relating to the financial structure of the demerged company. The duo will also play an advisory role on issues relating to the induction of a strategic/financial partner or capital market related transaction, if any, and "helping" in negotiations with such investors.