Leighton Returns to Annual Profit as Projects Completed

Leighton Holdings Ltd., Australia’s largest construction company, returned to full-year profit as it completed major projects and reduced debt.

Net income was A$450 million ($464 million) in the 12 months ended December from a loss of A$286 million a year earlier, the Sydney-based company said in a statement today. Leighton shares surged the most in four years after the result.

Leighton completed a toll road in Brisbane and a desalination plant in Victoria, which along with its Middle Eastern venture Habtoor Leighton Group had caused more than A$1.3 billion of losses and impairments. Chief Executive Officer Hamish Tyrwhitt is focusing on expanding profit margins as he cut gearing, a measure of debt levels, to 35 percent of Leighton’s capital from 46 percent at the end of June.

“This result reflects the strength and diversity of our underlying business,” the company said. Leighton’s “underlying” earnings for 2013 will be between A$520 million and A$600 million, it said today.

The 2012 result compares with the A$469 million median profit estimate of nine analysts surveyed by Bloomberg.

Leighton shares rose 11 percent to A$23.14 at the close of trade in Sydney, the biggest gain since December 2008, with volume more than three times the three-month average. The benchmark S&P/ASX 200 index rose 0.9 percent.

Falling Prices

A fall in commodity prices has hit demand for contract mining that made up about 23 percent of revenue last year and slowed mining and petroleum construction projects which comprised another 16 percent. Price declines in thermal and coking coal led to a slowing of work operating mines in Australia and Indonesia in the second half of the year, Leighton said.

“The expected peak in mining-related infrastructure investment may result in a pause in economic activity” over the coming year, the company said. “Fundamentals are favorable, however, for this growth gap to be filled by activity in other parts of the economy.”

The company has aligned more closely with major shareholder Hochtief AG and Spain’s Actividades de Construccion y Servicios SA over the past year. It moved its financial year end to December and added the Spanish company’s construction head Marcelino Fernandez Verdes to its board.

Hochtief has 49 percent of Leighton’s shares and is in turn controlled by ACS via a 54 percent stake, according to data compiled by Bloomberg.