LARSEN & TOUBRO LTD - RESULTS - Q2 FY 13 - SALES 17% UP - EBITDA 16% UP - RECURRING PAT 15% UP

LARSEN & TOUBRO LTD

Q2 FY13 Performance Highlights

30% UP - Order Inflows

11%  UP - Order Book

17%  UP - Sales

16%  UP - EBITDA

15% UP - Recurring PAT

ORDER INFLOW & ORDER BOOK – MH1 FY 13

Ø Core Infrastructure opportunities driving order inflows; Hydrocarbon tendering picking up; broadbased investment momentum in power and industrial capex yet to pick up

Ø Delay in Investment decision making continues

Ø Order Book presently at 2x+ revenues

Ø ORDER INFLOWS – Rs.406 Bn

Ø Order Book  -  Rs.1585 Bn

PERFORMANCE SUMMARY

SALES TO EBITDA

(Rs.In Bns)

Q2 FY13 :: Q2 FY12 :: % Ch:: Rs. Billn

132 :: 112:: 17% :: Net Sales(A)

27  :: 13  :: 111% :: Export Sales

100 ::  84 :: 19% :: Mfg, Cons. & Opex  

13 :: 11  ::  21% :: Staff Costs

5 :: 6 ::  -9% :: Sales, adm. & other

118 :: 100  :: 18% :: Total Opex (B)

14  ::  12  ::  16%  :: EBITDA (A-B)

Ø Robust Sales growth witnessed across project businesses driven by large order book and efficient execution

Ø FY12 International Hydrocarbon Orders translating into FY13 Exports Sales growth

Ø Increased MCO Expenses due to job mix variation , material intensity and higher sub-contracting

Ø Staff cost increase led by manpower augmentation and normal revisions / increments

Ø Reduction in Q2 SGA due to lower non-linear provisions, lesser Forex MTM, and expense control

PERFORMANCE SUMMARY

EBITDA TO PAT

Q2 FY13 :: Q2 FY12 :: % Change :: Rs.Billion

14.05 ::  12.17   ::  16%  :: EBITDA

10.7%  ::  10.8%  :: -0.1%  ::  EBITDA

(2.35) ::  (1.97)::  19%  :: Interest Expenses

(2.03) ::  (1.71):: 19%  :: Depreciation

3.29 ::  3.20 ::  3%  :: Other Income

(3.81) :: (3.70):: 3%  :: Provision for Taxes

9.15   ::  7.99 ::  15%  ::  Recurring PAT

11.37 :: 7.99 :: 42%  ::  Profit after Tax

Ø Stable Q2 EBITDA margins in line with execution progress and expense control

Ø Interest expenses are commensurate with borrowing levels

Ø Other Income in Q2 mainly on account of treasury gains

Ø Exceptional / Extraordinary items in Q2 arising out of divestment gains and Satyam provision write back; VRS charge in Q1

SEGMENTAL BREAK-UP :: H1 FY 13

Details              ::NET REVENUES :: EBITDA

Engg & Constn : : 87.6% (85.6%)  :: 83.5%(81.8%)

Electr.&Electronics : 5.8% (6.7%) :: 5.5%(5.8%)

Mach&Indl Products : 3.9% (5.7%) :: 4.9%(8.6%)

Others : 2.7% (2%) :: 6.1%(3.8%)

·       Figures in Brackets relate to corresponding Last Year Period

‘Engineering & Construction’ Segment

Ø Headway in Transportation, Urban Infra and Water Infra sectors are main drivers of Order Inflow growth; other sectors still witnessing challenging environment

Ø Sporadicity in export award decisions; some success in Hydrocarbon and Nuclear Power

Ø Revenue growth driven by large order book and superior project rollout

Ø Growth in Export sales boosted by FY12 Hydrocarbon wins

Ø Healthy margins due to execution efficiency

Ø Y-o-Y Increase in segment assets due to NWC spike

Ø EBITDA MARGINS :: 11.6% IN H1 FY 13 (11.9% IN H1 FY12)

‘Electrical & Electronics’ Segment

Ø Modest growth in sales due to subdued industrial activity and delayed customer clearances

Ø Switchboard order wins from Middle East translating into export growth

Ø Business is focusing on margin recoupment through profitable product mix, shifting of production to low cost regions, and scaling up of international business for value-added products / projects

Ø EBITDA MARGINS :: 11.5% IN H1FY 13(10.8% IN H1 HY12)

‘Machinery & Industrial Products’ Segment

Ø Dampened revenues witnessed across most businesses due to –

Ø →Sluggish industrial conditions

Ø →Lower offtake from wind power industry

Ø →Stress on supply chain

Ø →Transfer of business to subsidiary for integration purposes

Ø Mining ban continues to affect Construction and Mining business

Ø Margins adversely affected due to higher input costs and operating leverage

Ø EBITDA MARGINS : 15.4% IN H1 FY 13 (19.0% IN H1 FY 12)

‘Others’ Segment

Ø  Major revenue contributed by Integrated Engineering Services (business derived mainly from North America and European markets)

Ø  Revenue growth in Q2 and H1 aided by INR depreciation

Ø  IES currently in ramp-up phase

Ø  Margin expansion achieved through operational efficiencies and aided by currency movements

Ø  EBITDA MARGIN IN H1 FY 13 : 27.4%(23.5% IN H1 FY12)

L&T Infotech Group – H1 FY13

Ø Robust revenue growth of 28% in Q2 and 24% in H1 seen across all business segments and industry verticals

Ø Earnings aided by currency movement

Ø Positive outlook

Ø Pat :: Rs.2.72 Bn (Rs.1.98 Bn)

L&T Finance Holdings

Ø Diversified business portfolio has been an enabler of healthy growth

Ø Lower disbursements are mainly due to drop in Infra Finance disbursements and reflect the sluggishness in the current infra environment

Ø Rural segment witnessing strong growth

Ø Focus is on credit quality and sustaining NIM’s

Ø PAT Rs.2.64 Bn (H1 FY 13); 2.21 Bn (H1 FY 12); Rs.4.55 Bn FY 12

Concessions Business Portfolio

Roads and Bridges:

Portfolio: 19 projects; 10 operational, 9 under implementation

Development: 2092 km

Project Outlay: `217 Bn

Metro:

Portfolio: 1 project; under implementation

Development: 71.16 km

Project Outlay: ` 164 Bn

Power:

Portfolio: 5 projects; under development / implementation

Capacity: 2842 MW

Project Outlay: ` 212 Bn

Balance Equity Commitment (Sept 2012): ` 93

Ports:

Portfolio: 3 projects; 2 operational, 1 under implementation

Capacity: 45 Mn TPA

Project Outlay: ` 57 Bn

Ø Total Project Cost : (sep,2012) :Rs.650 Bn

Ø     Equity Invested :Rs.49 Bn

Ø Balance equity commitment : Rs.93 Bn

Annexure 1: Major Orders Booked in Q2 FY13

Domestic ::

Ø Design & Engineering, Civil, Inland Transportation, Installation, Planning, Testing and Commissioning & Allied works for Lata Tapovan Hydro Electric Project, Uttarakhand :: Rs.7.81 Bn

Ø EPC contract for four Well Head Platforms (B 127) for ONGC :: Rs.7.49 Bn

Ø EPC contract for construction of significant stretches of Kishangarh - Udaipur - Ahmedabad Highway, a part of NHDP Phase V from GMR Group :: Rs.6.45 Bn

Ø Railway electrification works between Guntakal –Raichur -Wadi stations of South Central Railway and railway construction, track work, signaling & telecommunication in the Lucknow and Izatnagar divisions of North Eastern Railway :: Rs.5.44 Bn

Ø Construction of 74 MLD water treatment plant, associated civil and Electro Mechanical & Instrumentation works for 111 villages and one town on a DBOM model, and drinking water supply project in Rajasthan :: Rs.5.18 Bn

Ø Design and Construction of Elevated Viaduct, Elevated Ramp & Five Elevated Stations etc. as part of Phase III of DMRC :: Rs.3.77  Bn

Ø Construction of 23 multistoreyed towers for a residential project :: Rs. 3.60 Bn

Ø Design and construction of four lane flyover, rail overbridges and viaduct at various locations in Kolkata :: Rs.2.75 Bn

Ø Doubling of lines on Rewari - Manheru section on Bikaner division of North Western Railway :: Rs.2.12 Bn

Ø International

Ø EPC contract for Saih Rawl depletion compression project for PDO, Oman :: Rs.13.02 Bn

Ø Supply & Installation of New 220/33 kV Grid Station and all Related 220 kV Cable/ Overhead Line works in UAE :: Rs,2.58 Bn

Ø  Construction of 11 kV distribution network and all associated HV equipment including backup generators and replacement of W42 switching station in UAE :: Rs.1.68 Bn

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LARSEN &TOUBRO LTD - (L&T) - RESULTS FOR - Q2 FY 2013 - SEP,2012 - IMPRESSIVE IMPROVEMENT - NET SALES UP 17.35%YoY; NET PROFIT UP 42.45% - POSITIVE OUTLOOK FOR FUTURE

LARSEN & TOUBRO LTD

RESULTS FOR Q2 FY 2013

SEP.2012

The quarterly Results of L&T Ltd for the 2^nd Qtr ending  Sep, 2012 are tabulated below. There has been an all-round improvement in Sales and Profits in all segments. The outlook for Future also is reasonably Bright.

QUARTERLY RESULTS – TABLE

L&T	Q.E.SEP12	%Dif QoQ	3m/f Jun 12	%Dif YoY	3 m/e sep,11
Gross Sales	1332753	10.34	1207833	17.18	1137391
Less E.Duty	13230	7.58	12298	1.96	12976
NetSales	1319523	10.37	1195535	17.35	1124415
raw material etc	319101	-14.22	372005	12.65	283272
Sub-contracting  Chrg	286875	12.81	254299	59.24	180152
Construction Materials	334946	64.46	203665	32.87	252083
Purchases if SIT	43712	-12.87	50167	-13.38	50466
Chng of FG,SIT,WIP	-87506	71.07	-51151	573.95	-12984
Other Mfg, Constr.Exp	99337	-6.53	106279	17.81	84319
Empl.Exp	130052	37.27	94740	20.62	107817
Sales,AdmnExp	52468	-7.68	56832	-8.97	57637
Depreciation	20396	6.26	19194	19.34	17090
Total Exp	1199381	8.44	1106030	17.6	1019852
Profit from Oprns	120142	34.23	89505	14.9	104563
Other Income	32939	-45.63	60584	2.91	32009
Profit Bef. Fin.Costs	153081	1.99	150089	12.09	136572
Finance Costs	23502	2.89	22841	19.29	19701
Profit Aft. Fin.Costs	129579	1.83	127248	10.87	116871
Except.Items	21429	-658.92	-3834		-
Profit Bef.Tax	151008	22.36	123414	29.21	116871
Prov.For current Tax	42317	12.56	37595	17.22	36102
Prov.For Def.Tax	249	-145.6	-546	-73.23	930
Total Prov.	42566	14.89	37049	14.94	37032
Net Profit  Aft.Tax	108442	25.56	86365	35.83	79839
Extraor.Items	5289		-		-
Net Profit  Aft.Tax	113731	31.69	86365	42.45	79839
B.EPS (Bef.Ex.I)	17.67	25.32	14.1	35.2	13.07
D.EPS(Bef.EI)	17.54	25.29	14	35.55	12.94
B.EPS Aft EI	18.54	31.49	14.1	41.85	13.07
D.EPS Aft EI	18.39	31.36	14	42.12	12.94
P.A.T.(EXCL.EXCEPT &EXTRAO.ITEMS)	91476	2.83	88955	14.58	79839
Public Hlding(%)			96.82%

HIGH LIGHTS

Order inflow surges 30%

Order Book Up 11%

Sales / Revenue grows 17%

EBITDA UP 16%

Overall PAT increases by 42%

·         L&T has recorded Gross Revenue of  Rs.13328 Cr for Q2 FY 13, registering  17 % y-o-y  growth. International Sales  during the quarter  constituted  21 % of total  revenue.

·         Order inflow at  Rs. 20967 Cr recorded an impressive y-o-y growth of  30%,  sustaining the  momentum seen during first quarter. Major orders  came  from  Building & Factories,  Infrastructure  and  Hydrocarbon sectors.

·         Order Book stood healthy at Rs. 158528 Cr as at September 30, 2012. International  Order Book constituted 12% of the total Order Book.

·         Recurring Profit after Tax for the quarter stood at  Rs. 915 Cr - recording an increase of 15% over the corresponding quarter of the previous year.  After  considering  certain exceptional and extra- ordinary items of  income,  the overall  PAT for the quarter stood at  Rs.1137 Cr, higher by 42%

Engineering & Construction (E&C) Segment

·         E&C Segment achieved Net Segment Revenue of  Rs.11633 Cr for the quarter registering a y-o-y growth of 19% on the back of healthy  order book and progress on various jobs as per schedule.

·         Despite persisting subdued investment cycle witnessed during the quarter, the businesses of E&C Segment garnered fresh orders of  Rs.19136 Cr, registering  a significant y-o-y growth of 31%. International orders constituted 24% of the total  order inflow of the segment.

·         Order Book of the Segment stood at  Rs.156183 Cr as at September 30, 2012.

·         The Segment recorded  improved  Operating Margin  at 12.2%  aided by efficient  project management and execution.

Electrical & Electronics (E&E) Segment

·         Recorded Net Segment Revenue of Rs.839 Cr,  a moderate y-o-y growth of 7% , as  industrial  demand remained sluggish.  International sales contributed  to  10% of total revenue as compared to 6% in Q2 FY 12.  Recorded an improved Operating Margin at 11.1%, despite competitive pressures.

Machinery & Industrial Products (MIP) Segment

·         Recorded Net Segment  Revenue of Rs. 531 Cr vis-à-vis  Rs.592 Cr recorded in Q2 FY 12. International sales constituted 17% of the total revenue.  Operating  Margin  of the segment  was lower at  14.7% due to reduced sales  volume and inflation effect on input costs.

“Others” Segment

·         Includes Integrated Engineering Services which recorded Revenue of  Rs.308 Cr, registering a smart growth of 51% over Q2 FY 12. Operating Margin stood at 23.1%  vis-à-vis  20.7% recorded in Q2 FY 12.

Order Book (Up 11%)  & Order Inflows (26%) -  H1 FY 13

Ø  Core Infrastructure opportunities driving order inflows; Hydrocarbon tendering picking up; broadbased investment momentum in power and industrial capex yet to pick up

Ø  Delay in Investment decision making continues

Ø  Order Book presently at 2x+ revenues

Performance Summary - Sales to EBITDA :

Ø  EBITDA  was 14.05 in Q2 FY 13; 12.17 in Q2 FY 12 ;24.92 in H1 FY 13; 23.65 in Hi FY 12 and 62.83 in FY 12. (Rs.in Blns)

Ø  Robust Sales growth witnessed across project businesses driven by large order book and efficient execution

Ø  FY12 International Hydrocarbon Orders translating into FY13 Exports Sales growth

Ø  Increased MCO Expenses due to job mix variation , material intensity and higher sub-contracting

Ø  Staff cost increase led by manpower augmentation and normal revisions / increments

Ø  Reduction in Q2 SGA due to lower non-linear provisions, lesser Forex MTM, and expense control

Performance Summary – EBITDA to PAT (Rs.in Blns)

Ø  EBITDA Margins were 10.7% in Q2 FY 13; 10.8% in Q2 FY 12; 9.9% in H1 FY 13; 11.4% in H1 FY 12; and 11.8% in FY 12.

Ø  Profit After Tax stands at Rs.11.37 Blns in Q2 FY 13; Rs.7.99 Blns in Q2 FY 12; Rs.20.01 Blns in H1 FY 13; Rs.15.45 Blns in H1 FY 12. And 44.56 Blns in FY 12.

Ø  Stable Q2 EBITDA margins in line with execution progress & expense control

Ø  Interest expenses are commensurate with borrowing levels

Ø  Other Income in Q2 mainly on account of treasury gains

Ø  Exceptional / Extraordinary items in Q2 arising out of divestment gains and Satyam provision write back; VRS charge in Q1

Balance Sheet :

Ø  Total Debt: Sep’12 – Rs.120 Bn; Jun’12 – Rs. 114 Bn; Mar’12 – Rs. 99 Bn

Ø  Gross D/E: 0.44

Ø  Support to S&A Companies - mainly to Developmental projects

Ø  Segmental NWC as % of Sales: 16.5% (Jun’12: 15.3%) – due to vendor credit

‘Engineering & Construction’ Segment :

Ø  Headway in Transportation, Urban Infra and Water Infra sectors are main drivers of Order Inflow growth; other sectors still witnessing challenging environment

Ø  Sporadicity in export award decisions; some success in Hydrocarbon and Nuclear Power

Ø  Revenue growth driven by large order book and superior project rollout

Ø  Growth in Export sales boosted by FY12 Hydrocarbon wins

Ø  Healthy margins due to execution efficiency

Ø  Y-o-Y Increase in segment assets due to NWC spike

‘Electricals & Electronics’ Segment

Ø  Modest growth in sales due to subdued industrial activity and delayed customer clearances

Ø  Switchboard order wins from Middle East translating into export growth

Ø  Business is focusing on margin recoupment through profitable product mix, shifting of production to low cost regions, and scaling up of international business for value-added products / projects

‘Machinery & Industrial Products’ Segment :

Ø  Dampened revenues witnessed across most businesses due to –

o   →Sluggish industrial conditions

o   →Lower offtake from wind power industry

o   →Stress on supply chain

o   →Transfer of business to subsidiary for integration purposes

Ø  Mining ban continues to affect Construction and Mining business

Ø  Margins adversely affected due to higher input costs and operating leverage

‘OTHERS’ Segment :

Ø  Major revenue contributed by Integrated Engineering Services (business derived mainly from North America and European markets)

Ø  Revenue growth in Q2 and H1 aided by INR depreciation

Ø  IES currently in ramp-up phase

Ø  Margin expansion achieved through operational efficiencies and aided by currency movements

L&T Infotech Group – H1 FY 13

Ø  Robust revenue growth of 28% in Q2 and 24% in H1 seen across all business segments and industry verticals

Ø  Earnings aided by currency movement

Ø Positive outlook

Ø  Profit After Tax up by 37% in H1 FY 13

L&T Finance Holdings :

Ø  PAT Rs.2.64 Blns in H1 FY 13; Rs.2.21 Blns in H1 FY 12 (+20%); Rs.4.55 Blns in FY 12.

Ø  Diversified business portfolio has been an enabler of healthy growth

Ø  Lower disbursements are mainly due to drop in Infra Finance disbursements and reflect the sluggishness in the current infra environment

Ø  Rural segment witnessing strong growth

Ø  Focus is on credit quality and sustaining NIM’s

OUTLOOK : Headwinds & Tailwinds

·         GDP Growth

·         High Subsidies, Worrisome Twin Deficits, Inflation, Currency, Oil Prices

·         Weak Investment Momentum

·         Resource Shortages (Land, Fuel, Water, Manpower)

ü  Intrinsic Strengths (Order Book, Balance Sheet, Governance, Talent Pool, Execution, Strategy)

ü  Political Re-energising

ü  Signs of Reforms, ‘Power Push’, some new Investment Signs (Metros, DFCC, etc)

ü  Consumption, Savings, Demographics, Transitioning Democracy

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