Surging electricity prices will dampen earnings growth for Stockland Group this financial year, the property developer and shopping centre owner says.
After boosting its full-year net profit by 34 per cent to $1.2 billion in the year to June 30, Stockland on Wednesday said rising power costs in its retail portfolio - its largest asset class - will slow earnings in 2017/18.
Overall funds from operations improved 8.5 per cent in 2016/17 but growth is expected to moderate to between five and 6.5 per cent over 2018.
Stockland commercial property executive John Schroder said east coast electricity costs have jumped by almost two thirds.
"The issue for FY18 is electricity," he told analysts.
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"The electricity increase in our portfolio across the nation is 48.4 per cent, or 60 per cent on the eastern seaboard.
"That also has an implication on occupancy costs and the ability to drive rent growth."
Stockland chief executive Mark Steinert said the company was in advanced planning for 10 new solar rooftop projects to be rolled out over the coming year to help mitigate electricity costs, following the success of a rooftop installation at its Shellharbour shopping centre in NSW.
Funds from operations jumped 17 per cent in its residential communities in 2016/17, while retirement living grew 11 per cent.
Mr Steinert said the likely impact of the arrival of online retail giant Amazon has been overstated, but Stockland is focused on growing offerings in categories such as restaurants and health services in its shopping centres, which are less vulnerable to digital disruption.
"We have been very orientated around those types of uses because we are confident that they will continue to be able to grow into the future and have a high resilience to digitisation or digital disruption," he said.
Mr Steinert tipped residential property price growth to soften to around three to four per cent over the year in Sydney and Melbourne, although he said Melbourne could exceed expectations, given better affordability and a booming population.
"Housing (in Melbourne) is half the cost of Sydney in the growth corridors and obviously logistics and office space rental is significantly lower as well," he said.
Stockland shares dropped four cents to $4.34.
DIVERSITY DELIVERS RETURNS FOR STOCKLAND:
* Full year net profit up 34.4pct to $1.2b
* Revenue up 17.9pct to $2.7b
* Final unfranked dividend up 0.6 cents to 12.9 cents
