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DP World's 2011 profit climbs 23%

Company focuses on emerging market as global container volumes continue to improve

Image Credit: Gulf News Archives
The Port of Jebel Ali, operated by DP World. The world’s third largest post operator will invest in an additional onemillion twenty-foot equivalent units (TEUs) of new capacity at Jebel Ali port this year as well as in a new four-millionTEU container terminal which will be operational in 2014.
Gulf News

Dubai: DP World on Thursday said its full year profit attributable to shareholders for 2011 grew 23 per cent to $459 million (Dh1.7 billion) compared to $374 million in 2010, fuelled by the improvement in global container volumes and a continued focus on emerging markets.

Profit for the year after separately disclosed items surged 82 per cent to $683 million over $375 million the previous year, backed by the sale of its Australian operations, the company said. Adjusted earnings before interest, tax, depreciation amortisation (Ebitda) increased 19 per cent to $1.3 billion. Revenue for the year dropped by three per cent to $2.98 billion.

The world's third largest port operator said it delivered a "better than expected" profit of $751 million, after separately disclosed items, up 67 per cent from 2010.

"This improvement in profitability is a reflection of our strategy, which sees us focus on the faster growing emerging markets and more profitable origin and destination and gateway cargo," said Sultan Ahmad Bin Sulayem, DP World Chairman.

DP World, which said earlier this week that it would repay a $3 billion loan six months ahead of schedule, said that its gross cash flow from Australian operations increased to $1.16 billion, while net debt has been reduced to $3.6 billion. The ports operator in 2010 sold 75 per cent of its Australian operations to private equity firm Citi Infrastructure Investors (CII) to reduce its debts.

Second half

"2011 has been another good year for DP World with the second half of the year delivering a better performance than the first half," said Mohammad Sharaf, DP World Group Chief Executive, adding that this improved performance was achieved "despite a deteriorating global economic backdrop" in the second half.

The company, which in January said that its container volumes in 2011 rose by 10 per cent over the previous year, will be investing in an additional one million twenty-foot equivalent units (TEUs) of new capacity at Jebel Ali port this year as well as in a new four-million TEU container terminal which will be operational in 2014.

"We have benefited from the improvement in global container volumes whilst retaining a very clear focus on generating additional revenue, driving productivity and upholding a disciplined approach to cost management," said Sharaf, adding that the London Gateway project in the UK will be operational in the final quarter of 2013.

In February, DP World said it handled 54.7 million TEUs in 2011.

Its portfolio of consolidated terminals handled 27.5 million TEUs in 2011, while like-for-like consolidated volume growth in the same period was 8 per cent.

In the Middle East, Europe and Africa region, DP World saw Ebitda grow by nine per cent to $861 million last year, while Ebitda in the Asia Pacific and Indian subcontinent region was up 26 per cent to $322 million. The Americas and Australia region delivered Ebitda of $203 million, up 37 per cent over the previous year.

The company said it is recommending a dividend distribution of $0.24 a share.

"On account of this strong improvement in underlying profit combined with the additional profit from the Australia monetisation, the board of DP World is recommending an increased dividend distribution to $199 million, or 24 US cents per share," said Bin Sulayem. He added that the board is confident of the company's ability to continue to generate cash and support future growth whilst maintaining a stable dividend payout.


The company's shares last traded yesterday down two per cent at $11.35 on the Dubai bourse.

Looking ahead, Sharaf said that though the global macroeconomic uncertainty has continued into 2012, the company remains confident about the long-term outlook for the industry.

"We continue to see growth across our portfolio in the first two months of the year, with an 11 per cent improvement in gross volume growth.

"We remain committed to delivering improved operational and financial performance over 2011," said Sharaf.

DP World has no plans to access the bond market at present, according to Sharaf.

"There is no need for bonds for us," he told reporters yesterday in a conference.

"We took the $3 billion facility and kept it in reserve as there was uncertainty in the market. Now things are getting better and thus we don't need that sum and so we returned it.

"Should we need it again, we will go to the market again," he said, adding that there is no pressing need to draw on a new, five-year loan worth $1 billion, which is expected to be "completed in the next couple of weeks".

"The $1 billion is also not needed. But if an attractive opportunity comes along, we don't want to be waiting for the money. So we are just keeping it," Sharaf said.

He also said that the company has a budget of $3.7 billion for the period 2012-2014 for ports development.

"This is our in-house cash and a part of our cap-ex [capital expenditure]," said Sharaf.

Analysts are also optimistic

Analysts are also optimistic about DP World's performance in 2012. Calling the outlook "positive", Redwan Ahmad, equity analyst at EFG-Hermes, told Gulf News: "We expect the market to grow by approximately 7 per cent [this year] and DP World should grow ahead of this. It's been a good start to the year already with container volumes up 11 per cent in the first two months."

Raghu Mandagolathur, Senior Vice-President of Research, Kuwait Financial Centre said: "DP World's focus on emerging markets should enable it to deliver a stable performance in 2012. Since they have not felt any major impact so far in 2012, we feel the first half will relatively be good."

He added that he expects to see maximum growth to come from Asia Pacific and the Indian subcontinent this year. "DP World's expansion in Karachi and the new terminal in India will help deliver higher growth numbers," he said.

Asked about expanding into new markets, Mohammad Sharaf, DP World Group Chief Executive, did not divulge details and said that the company is not at this time actively looking for strategic partners as it did in Australia. DP World operates over 60 terminals across the world.


Mandagolathur, meanwhile, said that apart from the company's planned expansion in Senegal, Egypt and Turkey, he expects DP World to enter some Latin American markets going forward.

EFG-Hermes' Ahmad added that while the 2011 performance was driven by strong growth at Jebel Ali, the Middle East and Asia markets are expected to drive growth this year for the company.

Calling the global slowdown a key risk to the company's business, Ahmad said that it is subsiding now.

"DP World has an exciting growth pipeline with London Gateway, Jebel Ali and Africa. We don't expect to see any new additions but nothing can be ruled out," he said.