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US-Iran war hits L&T margins for second straight quarter
L&T's Q1 profit and margins missed estimates as the US-Iran war delayed project execution in West Asia. A record ₹7.8 trillion order book and a large Europe contract offered some offset.
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The US-Iran conflict weighed on Larsen & Toubro Ltd's earnings for the second straight quarter, delaying project execution in West Asia and squeezing margins. The company's profit for the quarter ended June rose 14% from a year earlier to ₹4,123 crore, but fell short of the ₹5,266 crore consensus estimate from six analysts polled by Bloomberg.
Revenue grew 7% to ₹67,942 crore, beating the street estimate of ₹67,545 crore. That top line included one-off gains from selling its thermal power plant in Punjab to Torrent Power, according to R. Shankar Raman, L&T's president and whole-time director for finance.
Earnings before interest, tax, depreciation and amortization slipped 3% to ₹6,117 crore, missing the ₹6,535 crore analysts expected. EBITDA margin narrowed 92 basis points to 9%.
War Impact on Margins and Orders
The company pointed to the West Asia war as the main reason for the margin squeeze. The blockade of the Strait of Hormuz delayed material shipments to project sites, pushing back execution and raising costs, Shankar Raman said at a post-earnings briefing Tuesday.
“The margin impact in the infrastructure segment has hurt the overall margins. This was due to slower execution in the infrastructure segment due to the war,” said Amit Anwani, vice president and lead analyst for capital goods, industrials and defence at brokerage PL Capital.