Mirvac Could Face More Writedowns on Housing Market Slump

Mirvac Group, which posted its smallest six-month profit in two years on impairment charges, could face more writedowns if the Australian housing market deteriorates, said Managing Director Susan Lloyd-Hurwitz.

Australia’s third-biggest diversified property trust by assets reported fiscal first-half net income slumped 69 percent to A$55.2 million ($57.2 million) in the period ended Dec. 31 from A$176.6 million a year earlier. Operating profit declined 4 percent to A$194.2 million, the Sydney-based company said in a statement to the Australian stock exchange today.

“It’s not possible to rule out any further impairments, as markets do shift over time,” Lloyd-Hurwitz said in a telephone interview. “But we’re very comfortable that we’ve factored in the current market conditions and a forecast we think is conservative and sustainable,”

Mirvac last week announced a A$273.2 million writedown on residential projects after weaker than expected sales, the first impairment after Lloyd-Hurwitz took over the helm of the company on Nov. 5. The move brought writedowns to more than A$1 billion since 2007, according to Morgan Stanley’s research.

Operating earnings per share for the year ending June 30 will be as much as 10.8 cents, and its dividend will be between 8.5 cents and 8.7 cents, it said. Mirvac will pay a dividend of 4.2 Australian cents for the half, it said.

Different Place

“Management has stated that these projects were bought when the world was a different place,” Morgan Stanley analyst John Meredith wrote in a report last week. “However, with carrying values re-assessed by Mirvac every three months, and given the limited deterioration seen in residential markets in the last half, we believe these impairments should have been taken earlier.”

Mirvac’s newer projects are offering better returns than the older ones that were subject to the impairments, Lloyd-Hurwitz said, adding that the company expects to report a 10 percent return on invested capital in its development division in the year ending June 2014.

“We expect that to grow from there as under-performing projects become a smaller proportion of the overall portfolio,” she said.

Mirvac shares fell 1 percent to A$1.555 at the close of trading in Sydney, paring gains this year to 4.7 percent, compared with the 8.3 percent advance in the S&P/ASX 200 Index.