By David Winning

SYDNEY--Mirvac stuck with guidance for lower earnings this fiscal year, but said the property market was starting to turnaround ahead of a likely pivot by Australia's central bank toward cutting interest rates.

Mirvac reaffirmed guidance for operating earnings per security of between 12.0 Australian cents (7.58 U.S. cents) and 12.3 cents in the 12 months through June, and a distribution of 9.0 cents per security. It has pointed to lower margins at some of its apartment projects and higher net interest costs for developments will weigh on its annual profit.

If achieved, Mirvac's operating EPS for fiscal 2025 would be 13% lower at the midpoint of the range than the 14.0 cents reported for the previous year.

However, Chief Executive Campbell Hanan was about the outlook, declaring on Friday that Mirvac is "starting to see real benefits from the execution of our strategy."

"We've seen a strong pick-up in residential sales, which are up 51% on the same period last year, with pre-sales now sitting at A$1.9 billion," Hanan said. "Combined with continued development pre-leasing and capital partnering, we have good visibility on earnings and net tangible assets growth into the future."

Investors have been waiting for concrete evidence that residential property developers like Mirvac have engineered a business turnaround after a challenging few years featuring hesitancy among buyers.

Elevated interest rates have damped enthusiasm for taking out loans to buy a new home. Mirvac also owns a network of shopping malls that have traded against a backdrop of fragile confidence among some groups of shoppers.

Economists largely expect the Reserve Bank of Australia to join global counterparts this month by cutting interest rates for the first time since inflation ran hot during the Covid-19 pandemic. The central bank is due to decide on rates at the conclusion of its meeting on Feb. 18.

Mirvac eked out a statutory profit during the six months through December. It reported a net profit of A$1 million, reversing a loss of A$201 million a year earlier. The company had earlier declared an interim payout of 4.5 Australian cents a share.

Mirvac has signaled that it expects fiscal 2025 to be a bump in the road, anticipating that margins at the next phase of its residential projects will normalize. Costs in Sydney and Melbourne, the two biggest markets, have shown signs of stabilizing.

In a bet on the property cycle turning, Mirvac has restocked its pipeline of projects. The company has secured thousands of new residential lots and plans to launch six masterplanned communities over 18 months.

Mirvac is targeting the settlement of 2,000-2,500 residential lots in the current year, measuring up against the 2,401 settlements achieved in fiscal 2024.

"There is strong momentum as we move into the second half, with higher sales volumes and increased leads, driven by our middle-ring projects including Highforest, Riverlands and Harbourside," Hanan said.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

February 13, 2025 17:12 ET (22:12 GMT)

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