Leighton Holdings Announces Disappointing Quarter Results (Australia)

In line with the guidance announced on 11 April 2011, Leighton Holdings Limited announced a loss after tax (unaudited) of $382m for the nine months to 31 March 2011 from total revenue of $13.8bn and expects to report a loss after tax of $427 million for the 2010/11 financial year.

A summary of financial information for the third quarter is attached (refer Appendix).

Chief Executive, Mr David Stewart, said that whilst the result is extremely disappointing the Company is acting decisively to deal with all its issues.

“Having recognised the write-backs and impairments, Leighton is now well positioned to return to more normal growth and earnings in 2011/12 and beyond,” said Mr Stewart.

“Looking forward, the Leighton Group is in solid shape with most of our major markets – particularly Australian infrastructure and resources, and the bulk of Asia – proving very attractive. At the end of March, work in hand stood at a record $46 billion which has a strong level of embedded profitability,” said Mr Stewart.

“Since December 2010, the Leighton Group been awarded an additional $4.6bn in new work and currently there are approximately $4bn in contracts where the Group is in a preferred position. Leighton also has over $7bn worth of projects that are highly likely to be awarded in the next 12 months.

“We expect to return to profitability in 2011/12 and are currently forecasting to report a profit after tax in the range of $600 – $650 million,” said Mr Stewart.

“The outlook for infrastructure spending in Australia remains positive with growth expected in transport and utilities during 2011 and 2012. Spending on transport infrastructure is forecast to grow through to 2012 with particularly large increases expected in rail and ports.

“Calendar 2011 is expected to see strong growth in demand for iron ore and coking coal, underpinning prospects for contract mining. Thermal coal production in Australia is forecast to rise sharply in 2011, boosted by the completion of new mines, expanded port capacity in NSW and strong increases in demand from China and India,” said Mr Stewart.

“The strength of commodity demand and prices has driven a surge in construction, particularly in LNG and coal seam methane where our companies are currently helping to construct the Gorgon, Devil Creek and Curtis Island projects, and have been working on the Pluto project. This boom in resources related construction is expected to continue throughout 2011 and beyond.

“In Hong Kong, construction should grow strongly until at least 2014 fuelled by the Government enhancing transport links with China. Indonesia, on the back of contract mining of coal, will continue to be a solid and growing market, driven by strong demand from India and from other parts of Asia,” said Mr Stewart.

“We recently completed the sale of a 35% stake in our Indian operations to leading diversified Indian conglomerate, the Welspun Group, which opens up a new era of opportunity for Leighton in India. The strategic partnership that we have formed combines Leighton’s international construction capability and Welspun’s significant local market knowledge, a pipeline of construction work and preparedness to invest in infrastructure projects.

“We will build a partnership with Welspun that can capitalise on the enormous opportunities that are emerging in the Indian infrastructure sector. The Indian Government is planning to spend US$1 trillion on infrastructure projects during the XII Plan between 2012 and 2017, which should offer a wide range of projects for the new partnership to deliver.

“Leighton also sees India as offering a range of contract mining opportunities, particularly in coal, as the economy opens up and turns over more of its reserves to the private sector to develop. Mongolia’s abundance of natural resources should also continue to offer mining opportunities and the Group is targeting selected infrastructure projects,” said Mr Stewart.

“In the Middle East, some new work has been awarded recently including: a JV to build the AED2.2bn (A$565m) Al Mafraq Hospital in Abu Dhabi; the AED400m (A$103m) Abu Dhabi Islamic Bank’s new headquarters in Abu Dhabi; and AED600m (A$154m) of new work in Abu Dhabi for buildings and services at the Qusahwira oilfield and also more construction at the Zayed University. We believe that we’ve now seen the bottom in the Middle East and that things are starting to turn around,” said Mr Stewart.

“We are also very pleased that the Company’s recent capital raising has been well supported.

“It was very important to rebuild the balance sheet and position Leighton to take advantage of the many growth opportunities we see. This raising ensures that Leighton has sufficient liquidity to fund growth capital expenditure and working capital requirements, and to maintain an investment grade credit rating,” said Mr Stewart.

“The institutional component of the $757m offer has been well received and the retail component closed on Friday 6th May and settles tomorrow, Tuesday 17th May. We thank all of our existing and new shareholders, both in Australia and overseas, for their support of the capital raising.

“The Company is not planning to pay a final dividend but we do expect to return to paying a dividend in the 2012 financial year, reflecting our positive view of the outlook,” said Mr Stewart.

[mappress]
Source: leighton ,May 16, 2011;