Reuters: Global Markets: Leighton slashes profit forecast, shares tumble

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Leighton slashes profit forecast, shares tumble Mar 28th 2012, 23:33 MELBOURNE | Wed Mar 28, 2012 7:33pm EDT MELBOURNE (Reuters) - Top Australian contractor Leighton Holdings (LEI.AX) slashed its full-year profit forecast by a third due to cost blow-outs on its two biggest projects, knocking its shares down more than 9 percent to a two-month low on Thursday. The downgrade was worse than expected after the company, majority-owned by German construction group Hochtief (HOTG.DE), put its shares on a trading halt two days ago and flagged a profit update was on the way. Leighton cut its outlook for underlying net profit to A$400 million to A$450 million ($415 million to $467 million) from an earlier forecast of A$600 million to A$650 million for the year to June 2012. The shares fell as much as 9.2 percent to a low of $21.57 in early deals, their lowest since mid-January. "We wouldn't be buying Leighton, regardless of price, until we see at least three years of a return to profitability and genuine effort to reaffirm to the market that risk management is under control," said broker City Index's chief market analyst, Peter Esho. Esho said this may not be the last profit warning from a company that has had problems managing risk on its projects in Australia and the Middle East. Leighton blamed slower-than-expected progress on its A$4.2 billion Brisbane Airport Link road and tunnel project, where it said costs had increased as it tried to accelerate work and bad weather had slowed progress. It also said costs had increased at its A$3.5 billion desalination plant in the state of Victoria, where flooding of tunnels that take water in and out had turned out to be more difficult than expected and work was slower than planned. It aims to open the Brisbane road to traffic by June 30 and plans to complete the desalination plant at the end of this year. Leighton tried to reassure the market that despite the problems, it has a strong balance sheet. "Given the overall financial position of the company, we have no need to raise capital," Hamish Tyrwhitt, the company's third chief executive in two years, said in a statement. ($1 = 0.9637 Australian dollars) (Reporting by Sonali Paul; Editing by John Mair) Link this Share this Digg this Email Reprints

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