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Leighton Group in Asia
Issue Date: 31 October 1997Issued By: Leighton Holdings Limited
Background
The Leighton Group has operated in Asia for over 25 years. The region now generates around one quarter of Group operating (sales) revenue. There are two Group companies operating in Asia - Leighton Asia and Thiess Contractors. Based in Hong Kong, Leighton Asia is most active in civil engineering/infrastructure and building markets, but also undertakes contract mining, foundation and marine engineering. Thiess Contractors' business in Indonesia is dominated by contract mining, but has diversified to include telecommunications infrastructure, process/environmental, and some civil and building work.
The Leighton Group has operated in Asia for over 25 years. The region now generates around one quarter of Group operating (sales) revenue. There are two Group companies operating in Asia - Leighton Asia and Thiess Contractors. Based in Hong Kong, Leighton Asia is most active in civil engineering/infrastructure and building markets, but also undertakes contract mining, foundation and marine engineering. Thiess Contractors' business in Indonesia is dominated by contract mining, but has diversified to include telecommunications infrastructure, process/environmental, and some civil and building work.
Business Approach
Markets are approached on a geographic basis and only projects that meet Group criteria are pursued. These criteria include issues such as client credit worthiness, currency exposure etc, and are designed to minimise the financial risk to the company.
Leighton Asia
Hong Kong - civil/infrastructure, building, marine, foundation
Thailand - building, civil/infrastructure, marine, foundation
Malaysia - civil/infrastructure, contract mining, building
Vietnam - building, civil/infrastructure
Philippines - contract mining, civil/infrastructure, building
The company has, from time to time, cautiously pursued work in China.
Thiess Contractors
Indonesia - contract mining, telecommunications, civil/infrastructure, building
1997 Performance
Asia revenue by company @ 30 June 1997: Leighton Asia $448 million (71%), Thiess Contractors $183 million (29%), Total $631 million
Asia revenue by geographic market @ 30 June 1997:
Hong Kong $314 million (50%), Indonesia $183 million (29%), Thailand $76 million (12%), Vietnam/Malaysia $54 million (8%), Philippines/China $4 million (1%), Total $631 million
Asia work in hand by company @ 30 June 1997:
Leighton Asia $556 million (61%),
Thiess Contractors $361 million (39%),
Total $917 million
Asia work in hand by geographic market @ 30 June 1997:
Hong Kong $390 million (43%),
Indonesia $361 million (39%),
Thailand $38 million (4%),
Vietnam/Malaysia $73 million (8%),
Philippines/China $55 million (6%),
Total $917 million
Impact of Current Financial Instability
The impact of currency fluctuations in Asia on the Group's forecast results for the 1997/98 financial year is not expected to be significant.
The majority of the Group's revenue and profit from Asia are produced by the construction and mining operations in Hong Kong and Indonesia. Contracts in Hong Kong are written in HKD which is pegged to the USD. The HKD remains stable compared to the AUD. In Indonesia, the majority of the Group’s contracts are written in USD.
Contracts in Thailand, Malaysia and the Philippines have been adversely affected due to devaluations of local currency against the HKD, but the impact will be relative to the small size of their contribution to the Group. This will be offset by the favourable conversion of HKD into AUD.
There will also be an impact on the equity value of the investments of subsidiaries operating in these countries. However, the overall impact on the Group will not be significant.
At this stage, it is impossible to predict the medium to long term impact on regional economies and market opportunities. The Group will continue to monitor the situation in all markets in which it operates.
Opportunities in the Region
There are a number of major housing and infrastructure projects currently planned by the Hong Kong government:
Markets are approached on a geographic basis and only projects that meet Group criteria are pursued. These criteria include issues such as client credit worthiness, currency exposure etc, and are designed to minimise the financial risk to the company.
Leighton Asia
Hong Kong - civil/infrastructure, building, marine, foundation
Thailand - building, civil/infrastructure, marine, foundation
Malaysia - civil/infrastructure, contract mining, building
Vietnam - building, civil/infrastructure
Philippines - contract mining, civil/infrastructure, building
The company has, from time to time, cautiously pursued work in China.
Thiess Contractors
Indonesia - contract mining, telecommunications, civil/infrastructure, building
1997 Performance
Asia revenue by company @ 30 June 1997: Leighton Asia $448 million (71%), Thiess Contractors $183 million (29%), Total $631 million
Asia revenue by geographic market @ 30 June 1997:
Hong Kong $314 million (50%), Indonesia $183 million (29%), Thailand $76 million (12%), Vietnam/Malaysia $54 million (8%), Philippines/China $4 million (1%), Total $631 million
Asia work in hand by company @ 30 June 1997:
Leighton Asia $556 million (61%),
Thiess Contractors $361 million (39%),
Total $917 million
Asia work in hand by geographic market @ 30 June 1997:
Hong Kong $390 million (43%),
Indonesia $361 million (39%),
Thailand $38 million (4%),
Vietnam/Malaysia $73 million (8%),
Philippines/China $55 million (6%),
Total $917 million
Impact of Current Financial Instability
The impact of currency fluctuations in Asia on the Group's forecast results for the 1997/98 financial year is not expected to be significant.
The majority of the Group's revenue and profit from Asia are produced by the construction and mining operations in Hong Kong and Indonesia. Contracts in Hong Kong are written in HKD which is pegged to the USD. The HKD remains stable compared to the AUD. In Indonesia, the majority of the Group’s contracts are written in USD.
Contracts in Thailand, Malaysia and the Philippines have been adversely affected due to devaluations of local currency against the HKD, but the impact will be relative to the small size of their contribution to the Group. This will be offset by the favourable conversion of HKD into AUD.
There will also be an impact on the equity value of the investments of subsidiaries operating in these countries. However, the overall impact on the Group will not be significant.
At this stage, it is impossible to predict the medium to long term impact on regional economies and market opportunities. The Group will continue to monitor the situation in all markets in which it operates.
Opportunities in the Region
There are a number of major housing and infrastructure projects currently planned by the Hong Kong government:
- Construction of an average 85,000 units per year until 2004 in public and private sectors (over 50% for the Hong Kong Housing Authority)
- Reclamation, site formation and civil engineering works required for residential and commercial expansion
- Expansion of the MTR and KCRC rail networks, estimated to cost up to USD15.5 billion over the next 10 years
- Major highway improvements
- Expansion of container port capacity
- Kai Tak airport redevelopment.
In Indonesia, the wealth of natural resources and very competitive cost structures should continue to generate significant construction and mining projects. The devaluation of the Rupiah should help attract higher levels of foreign investment, especially in the following areas:
- contract mining
- resources development
- telecommunications
- manufacturing
-
heavy industries.
Group work in hand at 30 September 1997 is a healthy $4 billion and attractive opportunities exist for Group companies. Group operating profit in 1997/98 is expected to improve on last year.
Issue by: Leighton Holdings Limited
ACN 004 482 982
For further information:
Mr Wal King, Chief Executive Officer,
ph: (02) 9925 6912
Mr Dieter Adamsas, Director, Finance and Administration,
ph: (02) 9925 6923
Issue by: Leighton Holdings Limited
ACN 004 482 982
For further information:
Mr Wal King, Chief Executive Officer,
ph: (02) 9925 6912
Mr Dieter Adamsas, Director, Finance and Administration,
ph: (02) 9925 6923