Investors were scared, fearful and jumping at shadows yesterday in many sectors.
Take Leighton Holdings as an example.
The construction giant said it nearly doubled its nine-month profit, thanks to increase in infrastructure work and no write-downs, but it trimmed its full-year revenue forecast mostly because of the impact of the stronger dollar (which eased further overnight).
So what did the market do?
Went aggghh and sold the shares down almost $2.50, or over 7% to $32.16.
That was more than double the market’s 3.1% fall.
They touched a low of $32.14 in late trading which was the lowest the shares have been since last August.
Leighton said it now expects full-year revenue of around $18.5 billion, down from an earlier forecast for more than $19 billion.
But the company said it still expects a full year net profit of more than $600 million, which has been its guidance for most the year.
“For the 2009/10 financial year the Group expects to report full year revenue of around $18.5bn and net profit after tax in excess of $600m. The final results for 2009/10 and dividend payments are, of course, subject to market conditions,” CEO, Wal King said in yesterday’s statement.
Net profit for the nine months to March rose to $400 million from $220 million a year earlier. Last year’s result was hit by balance sheet cleaning as it wrote-downs the value of its toll road holdings.
Work in hand, a key measure for contractors, stood at $37.5 billion, and Leighton added that it was the preferred party on more than $6 billion worth of new work due to be awarded in the next few months.
“A sustained level of infrastructure spending over the next decade, particularly on transport, water, power and telecommunications projects, should continue to provide a good level of construction opportunities for the Group’s Australian based operating companies.
“Sustained demand from China and the rest of Asia for iron ore and coal should drive increases in export volumes which augers well for contract mining opportunities.
Demand for energy is also forecast to remain strong presenting the Group with significant opportunities over the next few years to undertake construction work on a number of Liquefied Natural Gas and Coal Seam Methane projects,” CEO Wal King said in the statement yesterday..
“Asia is expected to continue to grow providing construction and mining opportunities in our core markets of Hong Kong, Indonesia, India and Mongolia.
"While Dubai is likely to remain subdued for some time, the other markets of the Middle East, underpinned by their oil and gas reserves, should continue to support a good level of construction work.
In its statement Leighton pointed out that revenue for the nine months to March was $13.3 billion against $13.7 billion for the same period of 2009.
"On an equivalent exchange rate basis to March 2009, the revenue would have been $790m higher and also profit after tax would have been $27m higher."
And that’s why revenue for the year will be down and what the market ignored.
The point can also be made from looking at what Leighton said about work in hand.
“Work in hand at 31 March 2010 stood at $37.5bn which was negatively impacted by $3.6 bn from exchange rate effects, up from $36.5bn at the same time last year."
The stronger Australian dollar has clipped offshore revenue and profits.
As this year goes on, that influence will fade.
