China Railway Construction Corp, builder of more than half the nation’s railroads, will book a loss of $623 million on its Mecca light rail project, pending compensation talks with the client.
The construction contractor will book a charge of $541.4 million in the third quarter of 2010, causing “material” damage to earnings for the three month period and the year, the company said in a Hong Kong stock exchange filing yesterday.
The contract, originally valued at $1.8 billion, called for 18 kilometers (11 miles) of track linking religious sites around Mecca and Medina. The client subsequently raised planned capacity, changed other instructions and delayed land purchases, China Railway said yesterday. The contractor added resources to ensure on time completion this month.
China Railway said: “The company has been in negotiations with the owner for the compensation for the above variations in accordance with accounting standards, the company has not included the amounts of such compensation claims in the estimated total revenue from the contract.”
China Railway said it booked $82.3 million of losses from the contract in 2009 and the first half of 2010.
The stock, halted yesterday, will resume trading in Hong Kong today, the company said. It has gained 12 percent this year, outpacing the 8 percent increase in the benchmark Hang Seng Index. China Railway rose 4.9 percent to $1.43 on Oct 22. (Bloomberg)
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