The Dubai port operator DP World, which posted a 6.8 per cent increase in first half net profit, expects earnings to moderate in the second half due to weaker global economic growth.
“Overall, while we have enjoyed a positive first half, we expect growth rates to moderate in the second half due to softer global GDP growth,” Sultan bin Sulayem, DP World chairman said. “However, historically our second half throughput performance has been stronger than the first and we expect that trend to continue. The solid financial performance of the first six months leaves us well placed to meet full-year market expectations.”
The container market is being affected by uncertainties that include the economic outlook in China, and low shipping rates, but DP World’s diversified portfolio will help the company weather the economic turbulence, the chairman said.
“I believe whatever is happening in China will not take immediate effect, to see it in the second half,” said Mr Sulayem. “Markets are unpredictable and we are ready to deal with it.”
Profit attributable to equity holders after separately disclosed items rose to US$364 million in the first half from $341m in a year-earlier period thanks to container growth in the Middle East, Africa and Europe.
Revenue grew 14.5 per cent to $1.9 billion from $1.66bn in a year-earlier period, partly due to acquisition of Economic Zones World (EZW), a free zone company in Dubai. DP World operates the Jebel Ali Port and its adjacent free zone after it acquired EZW from Dubai World, last year for $2.6bn. Dubai World is a parent company of DP World. The port operator has also acquired a second terminal in Canada for C$580m as it seeks to boost its capacity and capture trans-Pacific trade between Asia and North America.
DP World’s consolidated throughput, or volumes at ports that the company controls, increased 3.5 per cent to 14.38 million twenty-foot equivalent units (TEU) in the first half of this year from 13.89m TEU in a year-earlier period.
DP World, one of the world’s biggest port operators, plans to boost capacity at its more than 65 ports to 85m TEU by the end of this year, from 76m TEU now.
The company also reiterated that it is targeting 100m TEU of capacity by 2020, depending on market conditions. The port operator plans to maintain its portfolio consisting of 70 per cent exposure to origin and destination cargo and 75 per cent to faster growing markets.
The port operator would like to expand and enter new markets, including Africa, Latin American and Iran. Africa and Latin America are attractive due to their buoyant economic growth outlook. Iran’s ports on the Caspian Sea and Arabian Gulf make a natural link to DP World’s ports in the region.
“Africa is on our top list of places of where we would like to expand and we are looking and studying and evaluating opportunities,” said Mr Sulayem. “We are looking at the Pacific side in Latin America where we believe growth is still strong. We are talking to the Iranian authorities and as soon as we know how much our customers want to handle business (there), we will be ready to take advantage of that.”
With regard to capital expenditures, the firm is forecasting $1.2bn in capex in each of 2016 and 2017, as the port operator continues to invest in expanding its ports. The firm is forecasting capex of up to $1.9bn for this year.
DP World will spend $1.6bn on a new terminal at its flagship Jebel Ali port in a huge boost for trade through Dubai. The move will boost capacity by 16 per cent by 2018 and cater to future growth in the UAE and the region.
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