DP World defies US slowdown

DP World saw a 21 per cent rise in container handling in the first half, but analysts forecast slower trade ahead.

Emerging markets pushed DP World's numbers up but analysts warn of slowing demand.

ABU DHABI // Strong growth at DP World's Middle East, Australian and Indian ports helped the company to a 21 per cent rise in total container handling in the first half of the year, but analysts say the second half will carry greater risks as shipping lines and freight forwarders are forecasting slowing trade. The world's fourth-largest ports operator handled 13.6 million container units between January through June, up from 11.2 million last year, indicating the feared contagion from a slowing US economy has yet to seriously dent the global company.

Instead, DP World said it had benefited from a US slowdown, as traffic was re-routed through its ports in India, Africa and the Middle East. DP World does not operate any terminals in the US. Analysts said the company's international presence would help protect it against headwinds from slowing economies in the West. "We feel DP World's diversified global portfolio of ports and exposure to faster growth emerging markets justify a premium versus the sector," Samantha Gleave, an analyst at Merrill Lynch, said in a report.

The company's underlying container growth, which does not include new concessions opened within the past 12 months, was 11 per cent, roughly in line with expectations. In the past 12 months, DP World added Sokhna, Dakar and Jeddah to its list of consolidated ports. Recently, the company won a bid to operate Tarragona container terminal in Spain, and it is waiting to hear the results of a contest to run Thessaloniki Port in Greece.

DP World's best performing region was Europe, Africa and the Middle East, where traffic grew 21 per cent. Lower growth was reported at its terminals in the Americas and Australia, and in the Asia-Pacific region and Indian subcontinent, although all areas still topped 10 per cent growth. The figures reflect DP World's results for its consolidated terminals - the 25 international ports where it has a majority ownership. DP World owns minority stakes in another 19 ports.

Mohammed Sharaf, the chief executive of DP World, said the results showed that the company's investments in new port capacity were coming to fruition. "The growth was driven by our focus on the faster growing emerging markets along the Asia-Europe trade routes, and our success in rolling out capacity in those markets which are capacity constrained," he said. At its flagship Jebel Ali port in Dubai, the company managed to stay a step ahead of runaway growth by expanding capacity to 11 million Twenty-foot Equivalent Units (TEUs) last year, with plans to go up to 14 million TEUs by the end of this year.

Looking ahead, however, analysts caution that major freight forwarders such as Kuehne & Nagel, based in Switzerland, are forecasting slower growth rates in the logistics market. Robin Byde, an analyst at HSBC in London, said sea freight growth in the first half dropped by three to five per cent, lower than expectations. "We are still concerned that momentum may slow in the second half and into next year, based on similar results in the sector for other companies."

Mr Byde said worries over global trade shifts may be a factor in the DP World share price, which is down 35 per cent on the year. "There is a nervousness among investors about global trade, even though most investors recognise DP World is a well-run company with good prospects in the medium term," he said. "However, the potential downside is in the near term." @Email:[e-mail]