Leighton notes project performance deterioration

11 April 2012

Leighton Holdings this month identified a “detorioration in the financial performance of [the Brisbane] Airport Link and the Victorian Desalination Project”. It will result in a forecast profit reduction of AUD 254M (USD 263.6M) before tax reflected in the current financial year to 31 December 2012.

Leighton CEO Hamish Tyrwhitt expressed deep disappointment at the change from the December 2011 quarterly reviews. He added that the company had believed then that the Brisbane Airport Link and Victorian Desalination Project performances had both stabilised.

Tyrwhitt added, “Wet weather in Brisbane, productivity below expectations at both sites combined with the complexity of the commissioning of the integrated systems at 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.

“The deterioration at Airport Link is, in part, due to the acceleration of the commissioning which started in February and it is now forecast to be more costly than anticipated. Forecast productivity on the site is not being achieved and consequently we are having to substantially increase the size of the workforce to deliver the project.

“Unseasonably wet weather since the middle of February has also caused delays which impacted the completion of the construction of the tunnel portals and the access ramps, and delayed the asphalting of the road.”

On the Victorian Desalination Project, Tyrwhitt said deterioration was due to some construction slippage and flooding of the intake and outtake tunnels.

Tyrwhitt said that despite these projects, the company has a ‘solid’ balance sheet and has work in hand of AUD 44.5bn (USD). He concluded, “We are targeting completion of APL by around the middle of the year and VDP by the end of the year which allows us to move forward and take advantage of the many opportunities that are still emerging.”