DP World posts 52% profits growth

RECENTLY-listed ports giant DP World posted a 52% growth in post-tax profit last year as it emerged unscathed from US economic slowdown and the dollar’s decline.

The Dubai-headquartered company that completed an initial public offering in November announced net profit from continuing operations of $420m and said expansion would continue through 2008 after a strong start to the year that was well ahead of 2007. DP World has concentrated on handling direct cargo rather than far less profitable transhipment freight.

“This is an excellent set of results driven by DP World’s well-positioned portfolio which benefits from the strong Asia to Europe trade routes and the growth of container cargo in the faster growing economies of the emerging markets,” said DP World chairman Sultan Ahmed Bin Sulayem, “This is a trend we expect to continue.”

In a telephone interview with Lloyd’s List, chief financial officer Yivraj Narayan said that, with only 40% of revenue denominated in dollars, there had been a positive benefit on that side of $100m resulting from the US currency’s depreciation, although that was partly offset by a $40m negative impact of foreign exchange fluctuations.

But the company has not seen any downturn in volumes through its ports resulting from flat conditions on some of the major trade lanes serving the US.

DP World operates 43 terminals around the world, including the flagship Jebel Ali facility in Dubai, now ranked 7th in the world, while it is developing the brand new London Gateway terminal in the Thames estuary east of London.

However, it does not have a presence in the US after being forced to sell the port concessions acquired through the takeover of P&O, under pressure from political protests in Washington.

Eventually, the Dubai company still wants to expand into the US, Mr Narayan confirmed.

“At the right time …. it’s a place where we would like to be, but there’s no hurry,” he said.

More immediately, growth will be focused on emerging markets in Africa, Latin America and ports along the Asia-Europe corridor.

In total, DP World handled just over 43m teu in 2007, up 18% on 2006 and ahead of market growth estimated at 12%.

Looking ahead, Mr Sulayem said DP World would keep expanding its portfolio.

“We continue to see plenty of opportunities across all regions, both existing port operations and new developments,” he said.

“While it is still early in the year and growth across global markets remains uncertain, we believe we are well placed to deliver good results this year.”

Global capacity of DP World facilities now stands at around 54m teu, with the company aiming to reach 90m teu by 2017.

DP World has climbed into the elite group of top four global port operators through a series of acquisitions including the purchase of P&O, the UK-based ports operator.

Last year also saw the ports operator enter new markets in Africa – Senegal and Egypt.

Growth was achieved not just through new facilities, but also DP World’s ability to attract more ship calls to existing ports. The company also said that 70% of its terminals are located in faster-growing emerging markets.

Only about a quarter of cargo handled by DP World is transhipment, a ratio that the company plans to retain.

Tariffs for transhipment cargo are typically around 30% to 40% of those for direct origin or destination freight, said chief operating officer Anil Wats. Furthermore, it is less stable and more likely to shift from one hub to another.

Terminal handling charges had remained firm, said Mr Wats, with revenue rising by 32% to $2.7bn – or 26% on a like-for-like basis, faster than volume growth of 18% and cost increases of 17%.

The board is recommending a larger-than-expected dividend of 1.33 cents per ordinary share.