UPDATE 1-Leighton cuts profit forecast 10 pct, shares drop

(Adds comment, Macmahon raising)

MELBOURNE, May 14 (Reuters) - Leighton Holdings Ltd (LEI.AX), Australia's top engineering group, cut its full-year profit forecast by 10 percent due to a construction slump in Dubai and a property development downturn at home, sending its shares down 7 percent.

The company, majority-owned by German construction group Hochtief (HOTG.DE), warned on Thursday it would have to cut its dividend in line with the revised forecast, after previously saying it would hold it steady.

"The group is continuing to face pressure on its operating performance for the remainder of the financial year," Chief Executive Wal King said in a statement.

It now expects a full-year net profit after tax of A$430 million ($329 million) for the year to June 2009, down from its earlier forecast of A$480 million. The new forecast is roughly in line with analysts' estimates. Net profit for the nine months to March fell to A$220 million ($168 million) from A$375 million a year earlier, also partly due to a new writedown on its holding in Australian toll road operator Connect East (CEU.AX).

Work in hand, a key measure for contractors, stood at A$36.5 billion, up 30 percent on a year earlier but down slightly from December, due to project cancellations in the Middle East, where Leighton has a 45 percent stake in Dubai construction firm Al Habtoor.

It said revenue this year would be around A$19 billion, and hold flat in 2010.

Finance director Scott Charlton told analysts he was less concerned about the resources sector than he was six months ago, as mining clients were no longer talking about production cuts.

"We've got some clients looking at some very, very big expansions," Charlton said.

He said the outlook for 18 months to three years out was much clearer than for the next year, because billions of dollars in infrastructure spending flagged by Australia's national and state governments would start to flow through in 2010 and 2011.

Leighton's shares last traded down 6.4 percent at A$22.80, after touching a low of A$22.63, while the broader market was down 2.6 percent.

Leighton said on Thursday it would take up its rights in a A$60 million capital raising by smaller rival Macmahon Holdings (MAH.AX), in which it holds a 17.5 percent stake.

The share sale is being priced at a 20 percent discount to Macmahon's last trade (see ID:nSYU006524).

Leighton agreed to partly underwrite the retail entitlement offer, which could raise its stake to just under 20 percent. ($1=1.307 Australian Dollar) (Reporting by Sonali Paul)