DP World first-half net income climbs 18% on higher container volumes

Global ports operator says "strong" balance sheet allows it to seek growth opportunities in ports and related maritime markets

Gross volumes grew 4.8 per cent to 35.6 million twenty-foot equivalent units. Reuters

DP World, the Dubai-based port operator that posted an 18 per cent increase in first half net profit, said its cash flow levels will enable it to make new investments if they become available at the right prices.

Net profit attributable to shareholders after separately disclosed items in the six months to June 30 advanced to $642 million (Dh2.36 billion) year-on-year, DP World said in a statement on Thursday to Nasdaq Dubai, where its shares are traded. Revenue increased three per cent on a like-for-like basis to $2.63bn on throughput growth and acquisitions, it said. Gross volumes grew 4.8 per cent to 35.6 million twenty-foot equivalent units.

"Our balance sheet remains strong and we continue to generate high levels of cash flow, which gives us the ability to invest in the future growth of our current portfolio, and the flexibility to make new investments should the right opportunities arise," Sultan Bin Sulayem, DP World group chairman, said.

The Dubai-based company, which operates 78 marine and inland terminals in 42 countries, has been on an acquisition spree this year. Last week it announced the purchase of Danish port-related logistics company Unifeeder for €660 million (Dh2.8bn), the company's first purchase of its kind, as it expands into shipping. Last month, DP World said it planned a logistics hub in Mali, ramping up its presence in Africa where it has ports in Senegal, Somaliland, Rwanda, Mozambique, Djibouti and Algeria. DP World has announced recent acquisitions worth $1.4bn, the statement showed.

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DP World’s interest in new investments in ports, logistics facilities and maritime-related businesses fits within the company’s core strategy to become a global trade facilitator, analysts said.

“DP World will likely continue to focus on frontier markets as geographies to invest in, similar to the existing portfolio, while still keeping an eye out for any opportunistic investment elsewehere,” Ahmed Maher, vice-president of research in the industrials sector at EFG-Hermes, said. “While there still remains uncertainty in global trade, DP World continues to focus on investments that offer them the their target return on capital throughout the concession life.

Capital expenditure guidance for 2018 remains unchanged at $1.4bn with investments planned in UAE, Posorja (Ecuador), Berbera (Somaliland), Sokhna (Egypt) and London Gateway (UK), the ports operator said. Capex in the first half of the year reached $439m, compared with $595m invested across the portfolio during the first half of 2017.

DP World’s growth in 2018 will be driven by the “effective integration” of its new acquisitions into the supply chain, thereby boosting volumes, Neil Davidson, analyst at Drewry shipping consultancy, said.

Beyond 2018, the new port of Banana at the Democratic Republic of Congo will boost long-term earnings by adding volumes from Africa’s third most populous country, he said.

DP World's balance sheet "remains strong" with leverage of 2.9 times and cash on the balance sheet of $1.5bn that gives it " flexibility to continue to seek growth opportunities in port and other related maritime markets, should they become available at attractive prices," it said.

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However, the company warned about market uncertainty despite an "upswing" in global trade in the first half of the year.

"The near-term trade outlook remains uncertain with recent changes in trade policies and geopolitical headwinds in some regions continuing to pose uncertainty to the container market," Mr bin Sulayem said. "However, the robust financial performance of the first six months also leaves us well placed for 2018 and we expect to see increased contributions from our recent investments in the second half of the year.”

Global trade tensions are on the rise after US President Donald Trump adopted an increasingly protectionist stance that prompted retaliatory measures from China and other countries.

"Increased use of restrictive trade policy measures and the uncertainty they bring to businesses and consumers could produce cycles of retaliation that would weigh heavily on global trade and output," the World Trade Organisation said in an April 12 report. "Worsening geopolitical tensions could be counted on to reduce trade flows, although the magnitude of their impact is unpredictable."

DP World said its first-half profit to shareholders before disclosed items dropped 2.1 per cent year-on-year to $593m after deconsolidation of the Doraleh port in Djibouti, which was seized by the African state's authorities in February, and consolidation of its port in Santos, Brazil.

Credit ratings agency Moody's Investors Service upgraded DP World's long-term issuer rating to Baa1 with a stable outlook in June.