--Westfield 1H profit rises to A$800.1M, beats expectations
--Sticks to FY profit, distribution guidance
--Will continue to buy back securities over next 12 months
(Recasts first paragraph; adds CEO comments in 7th, 13th
paragraphs; investor comment in 9th, 10th paragraph; background
throughout)
By Ross Kelly
SYDNEY--Shopping mall giant Westfield Group (WDC.AU) boosted
first-half net profit by almost a third, buoyed by positive
property revaluations and a more vibrant U.S. consumer.
The improvement was a little stronger than market expectations
and came even as revenue slid 11% due to the sale of a package of
U.S. malls that stopped them contributing to the bottom line.
Westfield's results follow similar earnings improvements
reported by other U.S. mall owners with upscale developments that
are soaking up healthier demand spurred by a gradual, yet sluggish,
improvement in the wider economy.
Sydney-based Westfield's net profit for the six months to June
30 rose to 800.1 million Australian dollars (US$839.3 million) from
A$608.7 million a year earlier and included a A$180 million gain
from property revaluations.
Funds from operations--a smoothed measure more closely watched
by analysts--rose 2.5% to A$751.2 million, beating the A$735.5
million average of six analysts' forecasts complied by Dow Jones
Newswires.
The owner or part-owner of more than 100 malls in the U.S.,
U.K., Australia, New Zealand and Brazil has been selling
less-lucrative assets to focus capital on larger malls including
the new World Trade Center development in New York, on track to
open in March 2015.
"You do see the building blocks in the U.S. coming together,"
joint Chief Executive Peter Lowy said in an interview. "You can see
the deleveraging of the consumer and the deleveraging of corporate
balance sheets. As that plays out, you're seeing the engine moving
forward."
Westfield securities were up 2 cents at A$9.60 by 0520 GMT,
while the wider market was down 0.5%.
Winston Sammut, a fund manager at Maxima Asset Management, which
owns Westfield securities, said a steady rise in their price this
year could plateau as investors start to find value elsewhere in
the real estate investment trust sector.
"Their U.S. peers have upgraded their outlook and profit numbers
going forward. It's interesting that Westfield hasn't done that,"
Sammut said. "And their shares are trading at a premium to their
net asset value."
Simon Property Group Inc. (SGP), the largest mall owner in the
U.S., in July upgraded its annual earnings guidance after
second-quarter earnings rose 5%.
Unlike that company, Westfield has a large quantity of malls in
Australia, where fragile consumer confidence and a strong local
currency shifting shoppers online are combining to hurt retailers
and erode Westfield's net property income. Blistering growth at
Westfield's London mall is also starting to flatten out as the U.K.
economy plunges into recession. The company is hoping that over 5.5
million visits to its new Stratford City mall during the two weeks
of the Olympic Games will attract more shoppers to the development
from other parts of the city.
"The economic issues that Europe is facing are actually playing
into our favor because of our capital base and strength in the
balance sheet. We are seeing opportunities that I don't think we
would otherwise see if there was a really strong economy," Lowy
said.
Westfield has acquired A$440 million of its securities through a
A$2 billion buyback program that will be completed over the next 12
months. It still expects to start between A$1.25 billion and A$1.5
billion of new developments in both 2012 and 2013.
Full year funds from operations are still expected to be 65.0
cents per security, building on the 32.8 cents booked for the first
half.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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