What ails Leighton?
The nation’s biggest construction group has endured several days of concerted selling in a generally buoyant market, a trend that bears an alarming similarity to the events preceding Newcrest’s earnings downgrade.
So far, there has been not a peep from the company, at least not officially. Those demanding some kind of explanation have been treated to the standard “we don’t comment on daily market price movements” line.
Unofficially, the story is that Leighton has been caught up in the fall-out from last week’s Orica downgrade. But that’s a stretch. While both are exposed to mining, and hence the downturn in mining investment, they are very different companies with very different businesses (see my article Mining services hit the dust).
But it is time either for the ASX to demand an official explanation or for the company to enlighten investors. An earnings downgrade this late in the confession period would cause an uproar.
Leighton has a history of moving independently of its construction peers, a trend that is likely to continue given the upheaval and infighting that has rocked the company at board level in recent times.
The company’s biggest shareholder, German group Hochtief, now is controlled by Spanish construction giant ACS, which is heavily indebted and struggling in the depressed southern European market.
It recently breached a decades long agreement between Hochtief and Leighton by lifting its stake in the Australian group, which now provides the vast bulk of Hochtief earnings.
Tagged as a vote of confidence in Leighton, the decision to creep higher to 55% and to continue that in the future should provide some share price support for Leighton.
But the Spanish group has a history of muscling in on its foreign subsidiaries. The days of independence for Leighton are fast drawing to a close.