Leighton Holdings has become the third engineering contractor in recent weeks to announce a major profit downgrade, following Perth-based Clough and Macmahon.
Leighton Holdings has become the third engineering contractor in recent weeks to announce a major profit downgrade, following Perth-based Clough and Macmahon.
In a statement to the Australian Securities Exchange today, Leighton said it will report a downgrade of $85 million in its first quarter profit due to project issues in Brisbane and the Pilbara and the strong Australian dollar.
However, Leighton said the sale of a stake in the group's Indian business will help the company report a full year profit in line with market expectations.
The contractor said a quarterly review identified a "problem project amidst an otherwise solid operating performance".
Last week Clough announced that its earnings in the current half-year were expected to be significantly down on the result for the second half of the 2010 financial year.
The company also anticipated its full year earnings would be down 20 to 25 per cent on 2009-10.
Clough shares have dropped 16 cents since the announcement to 65 cents.
And earlier last month, Macmahon released a market update forecasting a "break even" result for the first half of the 2011 financial year.
The company pointed to poorer than expected performance on a rail contract in WA and failure by its construction business to win more work as reasons behind the disappointing performance.
Macmahon's shares have fallen 20 cents since the announcement to 49 cents.
Leighton chief executive Wal King blamed a combination of difficulties for the company's negative quarterly result.
"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," he said.
"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."
Shares in Leighton plunged after Mr King said the company had encountered "access and engineering difficulties" that have delayed works and increased the projected costs.
"The problems encountered have contributed to a write-back in the forecast financial outcome of that project," Mr King said.
Leighton's shares closed down 7.4 per cent, or $2.67, at $33.63.
Leighton expects to complete the Brisbane AirportLink tunnel by mid-2012.
Mr King said with around 20 to 25 per cent 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 the sale of a 35 per cent 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.
Mr King said Leighton's work in hand was $43 billion, after adjusting for currency.
Meanwhile Leighton's subsidiary Thiess is reportedly taking legal actions in the WA Supreme Court in relation to Sino Iron's magnetite project.
Thiess is trying to recover unpaid monies from the mine's part-owner and lead contractor China Metallurgical Group Corporation.
