Property developer Australand believes it can improve earnings despite suffering a 15 per cent drop in annual profit.
Australand on Wednesday said its net profit dropped to $140.6 million for the year to December 31, 2011 amid weaker property markets in Queensland and Western Australia.
Revenue also fell eight per cent to $692.8 million.
Nonetheless the residential and commercial developer believes it can turn things around in 2012 despite the difficult conditions.
Managing director Bob Johnston said market conditions were weakest in Queensland and Western Australia, with subdued deal flow across the commercial and industrial segment.
However, inquiry levels had improved in the last quarter.
Melbourne and Sydney remained the strongest markets respectively, with confidence the most important factor contributing to residential property prices.
Mr Johnston said affordability had improved, thanks to the effects of the Reserve Bank of Australia’s interest rate cuts in 2011.
“Construction volumes have moderated, as have dwelling approvals in response to not only this weakness, but also in response to constraints being imposed on financing,” he told a briefing for investors and analysts.
Despite its 2011 profit slide, Sydney-based Australand remains cautiously optimistic and is budgeting for an increase in operating earnings per security for 2012.
In a statement, the company said its investment property division was providing reliable earnings which would underpin an expected 2012 unfranked distribution of 21.5 cents per stapled security, in line with 2011.
The company will update investors on its outlook for profit and distribution when it reports its first-half earnings results.
Chief financial officer Kieran Pryke said a previously-flagged change in accounting practice toward the recognition of internal development gains had dragged revenue and earnings before interest and tax (EBIT) lower in 2011.
Earnings were also hit by the hefty cost of revaluing seven development projects in Queensland, and a $24.2 million loss on interest rate derivatives.
Mr Pryke said the loss from interest rate derivatives will be unwound over time.
“Whether it’s there or not this year does depend on where three- and five-year swap rates are at the end of this year,” he told AAP.
But investors will not suffer any dividend traps because Australand is a real estate investment trust (REIT), he said.
Australand declared a final dividend distribution of 11 cents per stapled security for the second half of the year, bringing the total for 2011 to 21.5 cents.
Australand’s securities closed one cent higher at $2.64 on Wednesday.
