In the past six months, Leighton won $9.5 billion worth of contracts which included an $800 million bundle of contract mining extensions at Oz Mineral’s Prominent Hill gold and copper mine in South Australia.
Leighton achieved a net profit of $115 million for the first half of the year and has contracted work worth an additional $11 billion beyond five years.
Additionally, the group has a footing on $9.7 billion worth of tenders in preferred bidder position.
Six out Leighton’s top ten projects by contract value are for mining operations or mining services in Australia, with the biggest being a life of mine contract at Peabody Energy’s Burton coal mine in Queensland, worth $3.6 billion.
Mining contracting services generated $2.6 billion in revenue for the six months to June 30, lower than the $3.2 billion made from mining activity in the preceding six month period.
Leighton said its margin in hand was above 10% putting it in line with historic highs and despite some uncertainty surrounding the financial climate, it had plenty of opportunities for the group to pursue.
“Contrary to commentary suggesting a decline in investment activity in Australia, our
addressable markets have never been stronger,” Leighton chief executive officer Hamish Tyrwhitt said.
“Indeed, rational sequencing to some of the mega-projects in this country will assist us by reducing the costs of labour and equipment, and by ensuring the existence of a longer-term sustainable market.”
Tyrwhitt said Leighton continued to capitalise on growth from economic development and urbanisation in Asia, where it was already strongly established.
“We’ve been in Asia for more than forty years and have earned a reputation as a reliable provider of quality construction and mining services in key countries,” he said.
Not tempted to chase growth for growth’s sake, Tyrwhitt said although there were plenty of opportunities to pursue in the mining and construction pipeline, the company was being selective and evaluating capital requirements.
Leighton was stepping carefully in terms of costs and expenditure after tactfully shrugging off financial woes surrounding two key Australian projects.
The Victorian desalination project and the Brisbane Airport Link cut Leighton’s profits substantially as both projects experienced cost blowouts over the past few years.
The Airport Link was beset by delays caused by a number of accidents to workers on site.
Construction costs were also up on the tunnel after it was discovered more concrete and steel was needed than originally estimated.
But with the completion of the Airport Link late last month and the Victorian desalination plant on track for December, Tyrwhitt was confident the firm was headed in the right direction.
“This is a solid operating result during a period when we have made substantial progress on resolving legacy issues and delivered a record level of work in hand,” Tyrwhitt said.
“Importantly, we are repositioning the group and building the platform that will drive sustainable growth in the future.”
The company reconfirmed an estimated net profit of $400-$450 million for the year ending December 31 2012, excluding the capital gain on the sale of Thiess Waste Management Services announced on July 9, 2012.
Shares in Leighton were down 0.8% to $16.34.
This article first appeared in ILN's sister publication MiningNews.net.
