Yet another profit downgrade from Leighton Holdings yesterday, a move that saw the shares lose 7% of their value in late trading, or well over $2 each.
The company, which is resisting moves by a Spanish group to acquire control of it and its German parent, told the ASX just after 2 pm that earnings would be lower for the six months to December 31.
The company cut profits by $85 million due to the Brisbane Airport Link project, the impact of the strong Australian dollar and a dud joint venture in Western Australia.
The announcement was made two days before the 2010 AGM of Leighton.
A cut in earnings guidance by partly-owned associate, Macmahon Holdings, has also played a part
The rising value of the Australian dollar hit Leighton’s 2010 result, cutting the final profit by $15 million and revenue by $300 million. That was after warnings in the closing months of the 2010 financial year.
The contractor said in yesterday’s statement that a quarterly review identified a ‘‘problem project amidst an otherwise solid operating performance".
"Our result for the quarter has been negatively impacted by a combination of difficulties on the Airport Link project in Brisbane, the strength of the Australian dollar, which reduced the contribution from overseas operations, and a write-back by Macmahon of their profit forecast due to a joint venture rail project in Western Australia," chief executive Wal King said in yesterday’s statement.
"We will announce our financial results to the end of the September quarter at the Annual General Meeting on Thursday 4 Nov.
"The September results will reflect a deterioration of $85 million due to Airport Link, currency and the rail project, and so we will report a profit after tax for the quarter of $47 million.
"On the $4 billion AirportLink project in Brisbane, being delivered by a Thiess John Holland joint venture, we have encountered access and engineering difficulties that have delayed the works and increased the projected costs at completion.
"The problems encountered have contributed to a write-back in the forecast financial outcome of that project," said Mr King.
The shares plunged after Mr King immediately revealed the downgrade, shedding more than $3, or over 9%, to .95.
"The problems encountered have contributed to a write-back in the forecast financial outcome of that project," Mr King said.
Leighton expects to complete the Brisbane AirportLink tunnel by mid-2012.
And, with around 20 to 25% of the group’s income earned overseas, the strengthening Australian dollar had impacted results.
"In Western Australia, we experienced some setbacks on a joint venture rail project with Macmahon and, while the write-back in profit to Leighton was not material, the poor performance has reduced the expected contribution for the full year," Mr King said.
However, Leighton said the sale of a stake in the group’s Indian business will help the company meet its full year profit forecast of $510 million.
Mr King said the sale of the 35% stake in Leighton’s Indian operations to a strategic local partner was nearing completion.
"The expected profit from the sale will more than offset the operational issues experienced during the quarter and allow the Company to report a full year profit in line with market expectations," he said.
"As at the end of September 2010 the Group’s currency adjusted work in hand stood at $42.5 billion, up 2.5% since 30 June.
"This figure has been negatively impacted by the strong Australian dollar since June 2010 and would have been $1.8 billion higher.
"We are also preferred tenderer on over $4 billion worth on work of which we expect approximately $2 billion to be awarded in the next few weeks," Mr King said in the statement.
