Westfield Group (WDC.AU), the world's largest owner of shopping malls by value, on Wednesday posted its first net profit in two years and said it has weathered the financial crisis, with signs of retail improvements in key markets.

The Sydney-based group, which has 119 malls in the U.S., Australia, the U.K. and New Zealand, said net profit in the six months to June 30 was A$961 million, reversing a net loss of A$708.0 million a year earlier.

It was the first time Westfield has posted a positive profit result since the first half of the 2008 financial year, as the property value of its malls plummeted and retailers inside the centers experienced lower sales due to the global economic downturn.

Westfield said there are signs that both trends were reversing, with property values increasing and retail activity finally picking up in the U.S. and the U.K.

"We have weathered the crisis and are focusing on operations to create the platform for growth," Joint Chief Executive Peter Lowy said.

He predicted growth was set to resume, forecasting earnings per security of 90 cents for the full year, ahead of analyst forecasts.

The value of Westfield's properties rose A$349.4 million, compared to a A$2.47 billion fall last year.

Revenue for the six months ended June 30 was A$1.8 billion, down 13.3% from A$2.07 billion in the same period last year.

The group restarted A$1 billion of development projects earlier this year due to increased activity in the Australian retail market.

It said demand in the U.S. and U.K. hasn't yet reached a level which justifies a similar investment in large new development projects but the signs in both markets were positive.

"In the first half of the year we have seen improving performances from our United States, United Kingdom and New Zealand businesses and a continuation of the strong performance from our Australian business," it said in a statement.

Westfield's preferred measure of profitability, net operational earnings, which excludes property revaluations and other non-cash items, was A$1.03 billion, down 2.6% from a restated A$1.06 billion in the same period last year. The company said the result was impacted by the strength of the Australian dollar and would have been up 1.6% on a constant currency basis.

Even so, it exceeded expectations. UBS expected net operational earnings of A$955 million, with Citi forecasting A$905 million and Macquarie A$1.0 billion.

Macquarie said in a note to clients that it was maintaining an outperform recommendation on Westfield. At 0215 GMT, Westfield securities were up 32 cents, or 2.6%, at A$12.62.

Westfield has 55 shopping centers in the U.S., 44 in Australia, 12 in New Zealand and eight in the U.K.

In the U.S., it said comparable specialty retail sales in its centers rose 5.2%. They rose 2.7% in New Zealand and down 0.8% in Australia, where last year's result was boosted by one-off government spending to stimulate the economy.

Westfield announced it had sighed Costco Wholesale Corp. (COST) as a tenant in three U.S. centers and would be interested in similar deals in the U.K. and Australia.

The company will pay an interim distribution of 32 cents, down from 47 cents previously.

The reduced distribution reflects a payout ratio of 70% to 75% of earnings, down from 100% in previous years, in order to reserve funds for the group's development pipeline.

Westfield said it will retain A$292 million in earnings from the half year.

-By Neil Sands, Dow Jones Newswires; 61-3-9292-2095; neil.sands@dowjones.com
Westfield (ASX:WDC)
Historical Stock Chart
From Apr 2024 to May 2024 Click Here for more Westfield Charts.
Westfield (ASX:WDC)
Historical Stock Chart
From May 2023 to May 2024 Click Here for more Westfield Charts.