Wet weather conditions and cost overruns in the six months to December see Leighton downgrade its full-year profit forecast
By Jayne Munday | February 14, 2011
Wet weather conditions, the high Australian dollar and project cost blow-outs have seen Leighton Holdings’ first-half profit drop by 25 percent, from $289 million last year to $217 million.
The construction heavyweight has also downgraded its full-year forecast by more than 20 percent, from $611.9 million last financial year to around $480 million.
Leighton CEO David Stewart says while the result is “disappointing”, the company’s pipeline of work remains strong and group revenue is on the rise.
“Work in hand has grown to record levels despite the lingering impacts of the Global Financial Crisis and some tightness in certain markets, but demand for our construction, mining and O&M services continues to grow,” Stewart says in a statement to ASX.
He says total group revenue, including joint ventures and associates was up 8 percent to $9.7 billion compared to $9 billion last year.
At December 21, the group’s work in hand reached $45.6 billion with a record $16.1 billion worth of new work, extensions and variations awarded during the period.
However, gains on the sale of 35 percent of Leighton India were overshadowed by ongoing difficult conditions in Middle East construction and Australian property markets.
Design and engineering difficulties on Brisbane’s Airport Link project also drove up costs for Leighton, but Stewart assures things remain on track.
“The financial performance of Airport Link announced in November 2010 was obviously a disappointment but the project remains on track for the completion in the middle of next year,” he says.
Recent rains and flooding also posed some unwelcome setbacks for the group.
“Queensland’s wet weather has adversely impacted some of the Group’s mining projects and we lost time on some construction projects but nothing we cannot manage,” Stewart says.
“In the longer term, the Leighton Group remains well placed with a record level of work in hand, a strong balance sheet and a solid outlook for its core markets,” he says.
Leighton estimates Queensland flooding and excess wet weather in Indonesia has cost the Group around $40 million for the half year and $100 million for the full year.