Leighton Holdings’ shares were pummelled on Thursday after the company highlighted more problems with its Brisbane Airport Link and Victorian water plant projects.
The construction giant on Thursday cut its full year profit forecast by nearly a third because progress on the two projects had been worse than expected.
While the announcement was anticipated by the market, it did not stop investors from heading for the exits.
Leighton shares tumbled 6.7 per cent, or $1.59, to finish at $22.16.
City Index chief market analyst Peter Esho said Leighton’s bad news was probably not the last it had in store for shareholders.
“Leighton needs to go through its whole process of pricing and managing risk and make clear now any more problems down the line,” Mr Esho said in a research note.
“Unfortunately, this is unlikely to happen and we think more problems are likely in the future.”
Leighton, Australia’s largest construction company, said the deterioration in the two projects was expected to cost $256 million in pre-tax earnings.
As a result, it shaved more than $200 million off its 2012 financial year underlying net profit forecast.
The company now expects its full year profit to be $400-450 million, compared to the $600-650 million it estimated in February.
This latest downgrade followed a number of similar announcements in 2011 and 2012, including one that was the subject of a class action.
Hamish Tyrwhitt, Leighton’s third chief executive in three years, said there had been unanticipated costs at both projects, as more staff were hired in response to worse-than-expected productivity.
Wet weather in Brisbane, as well as some flooding at the Wothaggi desalination plant, were also to blame, he said.
“Circumstances on each project have conspired to bring about the results today which are very frustrating,” Mr Tyrwhitt said in a statement.
The Airport Link road and tunnel was scheduled to open on June 30, 2012, a date Mr Tyrwhitt said remained realistic.
The desalination plant was expected to produce water by mid-2012.
There was no need undertake a capital raising as Leighton maintained a healthy balance sheet and had $44.5 billion worth of work on its books, Mr Tyrwhitt said.
OptionsXpress market analyst Ben Le Brun said the Brisbane Airport Link and desalination plant projects were primarily responsible for Leighton posting a full year loss for the first time in more than a decade in 2011.
“Problem child number one and number two have reared their ugly heads again for Leighton,” Mr Le Brun said in a research note.
Leighton was understood to have told analysts on a conference call that it did not expect to have to announce further writedowns on the two projects.
The chance of further writedowns generally decreased as projects neared completion.
