Leighton Holdings tops broker forecasts

MELBOURNE - Australia's top construction group, Leighton Holdings, yesterday upgraded its outlook for annual profit growth to around 20 per cent, from 15 per cent previously and topping broker forecasts for growth of around 17 per cent.

Leighton, whose contracting subsidiaries include Thiess and John Holland, is thriving on a boom in road, rail and mine expansion projects. However, some investors are worried that cost pressures might trigger losses on some projects.

"Those are probably factored into their guidance. It allays some of those issues," said Macquarie Research analyst John Purtell.

Leighton shares, 53 per cent-owned by Germany's top building group Hochtief, rose 46c to A$17.71.

The group's work in hand has grown 9 per cent since December to a record A$16.1 billion ($19.8 billion), boosted by its takeover of contract miner Henry Walker Eltin.

It reported a 39 per cent jump in net profit to A$169 million for the nine months to March 31 from A$121.4 million a year earlier, and said yesterday it expected a strong final quarter.

Before the upgrade, brokers on average were expecting Leighton, which calls itself the world's largest contract miner, to report 17 per cent profit growth this year to A$251.8 million.

Leighton's shares have underperformed this year, falling 3 per cent against a 10 per cent rise in the broader market, but still trade at a pricey 17 times forecast 2007 earnings.

The most expensive engineering contractor, WorleyParsons, is trading on a multiple of around 23. It, too, upgraded its 2006 forecast yesterday, sending its shares up more than 2 per cent.

- REUTERS