April 12, 2011 – Scarcely a year after proclaiming a record profit, construction giant, Leighton Holdings, reported a massive loss in profit.
Leighton Holdings’ chief executive has apologized for issuing a profit downgrade, posting an after-tax loss of $427 million due chiefly to additional cost blowouts at the Brisbane Airport Link project where it is the lead contractor.
Earlier this year, David Stewart, successor of Leighton’s veteran chief executive Wal King, has stressed the potential threats of public-private partnerships after costs for two big infrastructure projects blew out.
Originally, Leighton has issued guidance for a full year profit of $480 million; however, he will now undertake a capital raising for $757 million as it booked almost $1 billion in writedowns on major projects in order to restore its troubled balance sheet.
Peter Gregg, Leighton’s’ Chief financial officer who has a solid reputation for his financial prowess, will facilitate the sell the capital raising to shareholders.
Leighton’s profit problems are due chiefly from downgrades on two of Australia’s biggest infrastructure projects – the Airport Link in Brisbane and the desalination plant in Victoria.
The joint venture in Brisbane between Theiss and the Leighton-owned John Holland has faced design, access, weather, engineering, and planning difficulties which have augmented the costs in order to complete the project.
While at Wonthaggi in Victoria, the desalination project has encountered wet and windy weather which will delay the first delivery of water which was supposed to be scheduled for November this year which is now been pushed back to mid-2012.
Mr. Stewart told an investor teleconference today that this profit downgrade is the most serious challenge encountered by the Leighton Group in the last 20 years, and apologizes to the shareholders for the situation they are in now.
He further assured the shareholders that the company is in great shape and they have great confidence in their markets and their people, and believe that they can go forward very strongly from this situation.
He also added that the group has embarked on a major review of its businesses and will change the way it tenders and delivers major projects and will be more focused on accuracy in tendering and risk identification.
