Hochtief lowers forecast on Leighton woes

29 March 2012

German contractor Hochtief has revised its 2012 net profit forecast downwards after its Australian subsidiary, Leighton, confirmed that its own earnings guidance had deteriorated.

Parent company Hochtief - which itself is majority owned by Spanish contractor ACS - said it now expected consolidated net profit for 2012 to come in at €180 million, compared to its previous forecast of €288 million.

The revision comes after Hochtief reported a full-year 2011 net loss of €168 million after being hit by costly project overruns and write downs at Leighton.

Leighton requested a two-day trading halt in its shares on 27 March while it reassessed the financial performance of its Airport Link Project in Queensland, write-downs on which helped drag it to a full-year loss and subsequent credit downgrade in 2011.

After the share suspension, Leighton confirmed that it expected its 2012 profit to be hit with further write-downs totalling AU$254 million (€198 million) on both the Airport Link Project and another desalination project in Victoria.

Significant deterioration

Leighton CEO Hamish Tyrwhitt said that he was deeply disappointed with the turn of events, which represent a significant deterioration in performance.

"Following the December 2011 quarterly reviews, we believed that the operational performances at both the Airport Link and Victorian Desalination Project had stabilised and that good progress was being made on both projects.

"However, circumstances on each project have conspired to bring about the results today which are very frustrating. Wet weather in Brisbane, productivity below expectations at both sites combined with the complexity of the commissioning of the integrated systems at the Airport Link have seen an unanticipated increase in forecast costs and denied us the level of performance that we were expecting or needed on those projects," said Mr Tyrwhitt, adding that the company hoped to complete both projects this year.

He said Leighton now expected to report underlying net profit of between AU$100 million and AU$150 million (€78 million and €117 million) for the first half of 2012, and full-year underlying net profit of between AU$400 million and AU$500 million (€311 million and €389 million).