Fitch has upgraded its default rating for Jebel Ali Free Zone (JAFZ), saying that its new parent, DP World, will help to improve its operations in Dubai’s largest trade district.
However, the credit ratings agency warned that profit margins could decline to “historical levels” this year.
Last December, shareholders of DP World approved the US$2.6 billion acquisition of Economic Zones World, which owned JAFZ.
Fitch said JAFZ would benefit from its “strong ties” with DP World, a primary ratings driver, especially when it came to “having strong legal, operational and strategic links with DP World”.
DP World owns and operates the port at Jebel Ali.
“DP World’s ownership of JAFZ will enable the group to improve the layout of the port access, allow it to expand its logistic capacity and access to support the ongoing growth of Jebel Ali port,” said Fitch.
“[It will also] improve integration of the port area with the new Al Maktoum International Airport.”
JAFZ was not available for comment.
Fitch also highlighted the importance of JAFZ to Dubai’s economy, saying that companies and business activities in the free zone accounted for 20 per cent of the emirate’s GDP.
It also said that JAFZ and its parent DP World would benefit strongly when preparations for and development of Expo 2020 commence.
Nevertheless, Fitch said more moderate growth levels would weigh on the free zone’s profit margins this year despite cost controls and JAFZ’s profits last year.
Its revenue last year rose 10 per cent year-on-year to Dh1.68 billion thanks to higher occupancy and fee income.
Fitch also warned of JAFZ’s “high concentration risk” in Dubai.
“The company’s performance is correlated with the general level of activity in Dubai as well as the economic strength and political stability of regional GCC members in particular,” it said.
Fitch stressed that any downgrade or negative revision of its outlook for DP World would affect DP World’s subsidiaries such as JAFZ.
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