Australia’s largest contractor, CIMIC, has seen around US$1.1bn (A$1.6bn) wiped off its market value after a Hong Kong financial research company claimed it had inflated profits with "aggressive" accounting techniques.
GMT Research said CIMIC had inflated profits by around 100% in the last two years, by as much as A$1bn, through "aggressive revenue recognition, acquisition accounting and avoidance of JV losses".
"CIMIC’s refusal to provide substantive answers to our questions suggests it has something to hide," the analyst wrote on its website on 30 April.
Shares in the company fell from A$51.08 on 1 May to A$46.50 yesterday (6 May).
GMT said in its report, which was first circulated to clients on 3 April, that it has been prompted to look into CIMIC’s books "owing to a large restatement of its shareholders’ equity".
The company was taken over by Spanish construction giant ACS in 2014. The company used its German subsidiary Hochtief to buy 73% of what was then Leighton Group’s shares.
CIMIC at first declined to comment on GMT’s accusations, but the firm later issued a "clarification statement" to the Australian stock exchange confirming its compliance with its disclosure obligations.
It said: "For accurate information and analysis related to the company, CIMIC advises market participants to refer to its 2018 and past annual reports, its quarterly, half and full-year financial results, and its other disclosures.
"CIMIC notes that its annual reports and full-year financial results are fully audited and in compliance with the accounting standards."
Shares in CIMIC have suffered a similar plunge in the past. In July 2016, shares fell after a Morgan Stanley analyst suggested reported profits could have exceeded cash profits by 30%.
Image: One of CIMIC’s projects is the Goldcoast light rail scheme (Via CPB Contractors, a CIMIC company)