Australian developer Mirvac defies downturn to post profit jump

[SYDNEY] Australian property developer Mirvac Group defied some of the steepest real-estate price falls in a generation to post an almost 40 per cent rise in half-year profit on Thursday, thanks to strong earnings from office and industrial divisions.

Mirvac shares hit a 10-year high after it said statutory profit for the six months to Dec. 31 rose to A$648 million (S$625 million) from A$465 million a year earlier, and adjusted its full-year earnings-per-share outlook slightly higher.

The result illustrates the strength of the company's diversified model and its sound office and retail portfolios, said Winston Sammut, head of listed securities at landlord and property manager Charter Hall Group.

"Those businesses are helping Mirvac get through this generally difficult period ... from an overall perspective it's a good result," he said.

Mirvac shares rose 3.3 per cent to their highest since October 2008 in early trade, while the broader market rose 1.1 per cent.

Australia's housing downturn is already the largest in a decade and is reverberating through the country's economy.

Fears of apartment oversupply have pushed building approvals to a five-year low and driven earnings downgrades at building suppliers Boral Ltd and James Hardie Industries , and builder AV Jennings Ltd.

Mirvac said it was still able to make profitable sales despite the slide because its properties were well-located and its default rate was less than 2 per cent.

At the same time office vacancy rates in Melbourne and Sydney have hit 30-year lows, driving rents higher and helping Mirvac to more than double total office and industrial revenue to A$959 million in the half-year.

Operating earnings from office and industrial properties rose 40 per cent to A$265 million, compared to A$58 million in residential earnings.

"With over 95 per cent of our office assets either prime or A-grade, and an 84 per cent overweight to the Sydney and Melbourne CBD markets, our office portfolio is ideally placed to take advantage of the favourable office market conditions," Mirvac CEO Susan Lloyd-Hurwitz said in a statement.

Total operating profit, which excludes one-off costs, rose 26 per cent to A$290 million.

The company announced an interim payout of 5.3 Australian cents per stapled security, compared with 5.0 cents per stapled security a year ago.

REUTERS