DP World reveals drop in profits

A lift-truck offloads containers at the Jebel Ali port, one of the 50 terminals operated by DP World.

DP World said net profit dropped 46 per cent last year because of a decline in container and cargo volumes as global trade slumped. The company, the world's fourth-largest port operator, booked a profit of US$333 million (Dh1.22 billion), down from $621m in 2008 after handling 25.6 million containers. DP World's container volume was down 8 per cent from a year earlier but was less than the 12 per cent decline industrywide, the company said.

DP World operates 50 terminals in 31 countries. It was significantly affected by a fall in general cargo at its flagship port in Jebel Ali, as a slowdown in UAE property development caused raw materials imports to drop, said Yuvraj Narayan, the chief financial officer of DP World. "The non-container business decline in Jebel Ali is just a straight reflection of the decline in the activity in the real estate sector," Mr Narayan said, adding that the non-container business offered some of the highest margins across the company. Local imports of housing materials, currently sluggish, might not rebound for one to two years, he said.

The company's fortunes are intricately tied to global trade, which nearly collapsed last year in the worst of the global economic crisis. This year should see a minor recovery in global trade flows, with volumes climbing 2.4 per cent, according to Drewry Shipping Consultants, a London firm. But global shipping was still fragile, it warned. "The rules that prevailed last year no longer apply, and there will be a different landscape in 2010 and beyond," Drewry said.

The first two months of this year offered hopeful signs as container volumes grew by 4 per cent, DP World said. "We are seeing positive signs, however it is too early in 2010 to confirm sustainability as the macroeconomic environment and global trade patterns remain unpredictable," said Mohammed Sharaf, the chief executive of DP World. As a result, the company plans about $800m of capital expenditure this year, compared with $1.1bn last year.

Total revenue declined by 14 per cent last year to $2.8bn, while the company's non-container revenue declined by 29 per cent, the company said. After a comprehensive programme to preserve its cash holdings last year, the company stripped away 7 per cent of its fixed costs. The profit and revenue drop were both in line with expectations, analysts said. "The results are good and in fact reassuring," said Kareem Murad, a transport analyst at Shuaa Capital in Dubai, adding that the company's top priority this year should be continuing to manage costs.

DP World has postponed many of its ambitious expansion plans, which originally called for opening more than a dozen new ports worldwide by 2013. Now the company says it is investing solely on the basis of current market demand, and last year it opened new terminals in Djibouti and Saigon. This year it plans to open facilities in Callao in Peru, and Vallarpadam in India. In addition, work is beginning on the London Gateway project, the UK's first new deep-water port in 25 years. Ships began preliminary dredging work at the site on the Thames estuary this month, Mr Sharaf said.

The company is also looking to the UK to address its flagging stock price. Last month, DP World announced it would seek a listing on the London Stock Exchange to provide international investors greater access to its stock, which has struggled on the thinly traded NASDAQ Dubai. DP World shares closed at 47 cents yesterday, compared with an initial public offering price of $1 in November 2007. Shareholders will be invited to approve an amendment at the company's annual meeting on April 26 to allow the London listing. Mr Murad said the move should help. "Promoting liquidity is a must," he said.

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