Construction giant Leighton Holdings says it’s not concerned about the recent woes of mining services companies due to its diverse business interests and cyclical nature of the industry.
Mining services companies WorleyParsons and UGL both issued significant profit downgrades last week due to the slowdown in investment in the resources sector in Australia due to lower commodity prices.
But Leighton chief executive Hamish Tyrwhitt said that only five per cent of the company’s revenue came from iron ore and coal contracts and he expected that to continue into the future.
He said the diverse nature of Leighton’s business ensured it would survive if the mining boom did collapse.
“The benefit of the Leighton group is we have incredible diversification across geographic range and across sectors,” he said.
“It’s just not in mining but in company development (and) infrastructure.”
Mr Tyrwhitt said Leighton’s mining contracts were based upon the volumes the company moved, not on commodity prices.
He said as long as Leighton’s clients were making money it would still get contracts.
Chairman Bob Humphris said in his experience in the coal industry as an engineer, miner and executive, he had found that downturns sometimes benefited contractors.
“I’ve been in the coal industry for 50 years and the coal price goes up and down,” he said.
“Sometimes there are more opportunities for contractors when the industry goes down.
“Companies don’t want to put the capital in and they get a bit more overburdened and they come and ask a contractor to do it.”
Mr Tyrwhitt said the construction giant planned to focus on expanding in Asia for its future sustainable growth.
“Without doubt, Asia is the fastest growing region in the world and is expected to contribute around half of global GDP by 2030 and two thirds by 2060,” he said.
He said Leighton would maintain its position in Australia but needed to grow globally in order to survive in the long term.
“It is clear that we need to move our focus from an Australian-centric approach to one where we export our skills to markets where our services are valued and where we can add value,” he said.
Leighton shares were up 65 cents, or 3.6 per cent, at $18.66 at 1551 AEST.