Mirvac Forecasts Lower Earnings for FY25 Amid Rising Costs

August 08, 2024 01:28 PM AEST | By Team Kalkine Media

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Mirvac Forecasts Lower Earnings for FY25 Amid Rising Costs — Image source: shutterstock

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Mirvac Group (ASX:MGR), a prominent property developer, investor, and fund manager, has projected a decline in earnings and distributions for the financial year 2025, attributing the anticipated downturn to increasing costs that are affecting margins on its apartment projects.

FY24 Performance and Guidance for FY25

In its full-year result for 2024, Mirvac, an ASX real estate sector stock, reported an operating profit of $552 million, marking a 5% decrease from the previous year. This equates to 14 cents per security, aligning with the company’s earlier guidance. The total distributions for the year reached 10.5 cents per security, also in line with expectations.

Looking ahead to FY25, Mirvac has set a target for operating earnings between 12 and 12.3 cents per security and a distribution of 9 cents per security. The company anticipates a reduction in earnings due to a lower contribution from its development business and higher net interest costs associated with development activities.

Chief Executive Campbell Hanan highlighted that the lower earnings are expected to stem from reduced margins on some of its apartment projects in Queensland and New South Wales. Despite these challenges, Hanan expressed optimism about the future, stating that the company expects its next phase of apartment projects to return to its normal target range.

Challenges and Strategic Outlook

Mirvac's statutory loss widened significantly to $805 million, compared to a loss of $165 million in the previous year. This sharp increase is primarily attributed to write-downs in its investment portfolio, especially concerning its office towers. The elevated loss reflects broader market difficulties and the impact of portfolio adjustments.

Hanan acknowledged that market conditions are likely to remain tough in FY25 but emphasized that the company is positioning itself for a recovery. The focus for Mirvac will be on navigating the current challenges while setting up for improved performance in the future.

As Mirvac prepares for FY25, stakeholders and investors will be closely monitoring how the company manages its cost pressures and development activities, as well as its strategies for returning to more favorable earnings and distribution levels.

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