DP World to nearly double investments to $1.9 billion this year

The Dubai-based port operator plans to boost capacity to 100 million units by 2020, depending on market demand.

A cargo ship offloads containers at the Jebel Ali port in Dubai. Kamran Jebreili / AP Photo

DP World plans to nearly double its investments this year as the world’s fourth-largest port operator increases its capacity by more than 14 per cent, the chairman said.

The multinational plans to spend between US$1.4 billion and $1.9bn this year, up from $1bn last year, Sultan Ahmed bin Sulayem said. The Dubai-based operator will invest between $500 million and $700m from 2016 to 2020.

Capacity at DP World will rise to more than 80 million twenty-foot equivalent units this year from 70 million units last year through expansions in Jebel Ali in Dubai, Turkey, Rotterdam and India. The firm plans to boost capacity to 100 million units by 2020, depending on market demand.

“Our balance sheet is strong and we continue to generate high levels of cash flow, giving us the ability to invest in the future growth of our current portfolio,” said Mr Sulayem.

He declined to say whether the firm will go to the debt capital markets or loan markets to fund growth.

In the first six months of last year, net cash from operating activities increased to $551m, the firm said in its first-half financial statement.

Net profit in the first half of last year rose 26 per cent to $332m from $264m in the year-earlier period as the company continued to expand its capacity and witness container growth.

In the third quarter of last year, the firm handled gross volumes of 15.4 million units, a 9 per cent increase from 14.17 million handled in the year-earlier period.

In 2013 DP World had 5.1 per cent market share in world container port throughput, according to figures from the shipping consultancy Drewry.

Global container port throughput is forecast to top 840 million units by 2018, with the fastest-growing regions projected to be Africa and greater China, according to Drewry. This represents an average annual growth rate of 5.6 per cent over the next five years, an improvement on the 3.4 per cent recorded in 2013. The overall growth in trade will boost average terminal use from the current 67 per cent today to 75 per cent in 2018, the consultancy added.

DP World operates the Jebel Ali Port and its adjacent free zone after it acquired Economic Zones World (EZW) from Dubai World, last year for $2.6bn. Dubai World is a parent company of DP World.

Jebel Ali is the Middle East and North’s Africa’s biggest port, and will be able to handle 19 million units next year after its expansion.

The EZW sale was part of an asset reshuffle last year as Dubai Inc firms sought to divest assets to pay off debt and restructure financials roiled by the global crisis.

Mr Sulayem declined to say if other deals such as the EZW acquisition were on the cards, saying: “We constantly review opportunities as and when they arise.”

However, DP World is looking for opportunities in emerging markets to expand its portfolio.

“We regularly assess opportunities around the world, with a particular focus on faster growing emerging markets, where we can add value to our customers. We tend not to disclose any details until there is something to announce,” he said.

“We believe a portfolio like ours, focused on origin and destination cargo, in markets where our customers need us to be, is well placed to meet changing trends and new opportunities.”

The firm is bullish about the trade and shipping outlook for the coming years as more and more bigger ships are built, despite wobbly global economic growth.

The World Trade Organisation reduced in September its forecast for world trade growth in 2014 to 3.1 per cent, down from a 4.7 per cent forecast made in April, and cut its estimate for this year to 4 per cent from 5.3 per cent because of weaker-than-expected global growth.

“Stronger growth coming from the East-West trade in the South rather than in the North means the industry also needs to invest now in regions such as Africa and South America. It has to support the growth of those economies and their ability to handle the larger vessels that will appear across trade lanes that previously catered only for much smaller vessels,” Mr Sulayem said.

“We remain committed to investing in both emerging markets and developed markets to ensure our ports are well.”

The rapid decline in oil prices, in which Brent has lost almost half of its value since June, could have a positive effect on the shipping business as bunker fuel prices drop, reducing shipping costs.

“The fall in oil price may stimulate particular economies such as India and China who are among the most energy-dependent countries, relying on overseas producers for much of their oil needs,” Mr Sulayem said.

“When these engines of growth begin to rise so does the rest of the world. As a barometer of world trade our operations can benefit should there be an increase in trading activity.”

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