DP World expects its 2009 full-year pretax profit to be hit by a decline in container volumes as the financial downturn saps global trade.
Economic slowdown hit DP World freight volume
DP World, the Dubai Government-controlled ports operator, reported an 8 per cent decline in cargo volumes as the financial downturn continued to sap global demand. Throughput at DP World's 28 terminals fell to 25.6 million twenty-foot-equivalent container units (TEUs) last year from 2008, it said. Leading the decline was traffic through its ports in the Americas and Australia, which fell 15 per cent to 3.5 million TEUs. Volumes in Europe, Africa and the Middle East slid to 16.5 million, a drop of 7 per cent, while that in the Asia Pacific and Indian subcontinent declined 5 per cent to 5.5 million TEUs. The operator will continue to focus on emerging markets such as Africa, the Middle East and Asia, which provides 75 per cent of its business, and a strategy that had helped it deliver better results than others in the industry, Mohammed Sharaf, the chief executive of DP World, said yesterday. "2009 was the worst year the world has seen," he said. "While we have seen a better performance in the second half of 2009, predicting global trade trends in 2010 remains challenging." DP World will report pre-tax profits in line with expectations, he said. A contraction in economic growth in most of the developed world has slowed trade and the shipping industry, hurting DP World, one of the largest marine terminal operators in the world, with operations in 31 countries. As a recovery in global exports took hold, Dubai World would be well placed to benefit, said Tim Fox, the chief economist at Emirates NBD. "The global recovery has picked up in the second half of last year and the trade flow has grown hand in hand," he said. "It may take a while for that to translate into individual companies' numbers, but I've no doubt that it will do so ultimately." DP World remains cautious about the outlook for this year, saying that while it expected an improvement in volumes, it would remain focused on managing costs and driving revenues. Ian Munro, the head of research at MAC Capital Advisors, said DP World was on track to post full-year revenue of US$2.78 billion (Dh10.21bn) for 2009 and net profit of about $323 million. "This is due to a combination of lower trade growth, and loss in ancillary and loss of Ebitda [earnings before interest, taxes, depreciation and amortisation] margins," he said. Shares in DP World rose 3.85 per cent to close at 54 US cents on the NASDAQ Dubai yesterday. Considered one of Dubai World's most profitable assets, DP World has been excluded from the $22bn debt restructuring talks of its parent company. DP World looks set to grow at a more considered pace this year than the rapid expansion of previous years, with the firm saying that although customer confidence was improving it remained fragile, with a limited outlook for the medium term. Opening under DP World's banner this year will be Callao in Peru, a terminal with basic facilities, and Vallapardam in India, a greenfield development. It is also developing Port Qasim in Pakistan, due for completion early next year. Building will also commence on infrastructure foundation work on the $1.5bn London Gateway project in the UK, which will eventually generate up to 36,000 jobs. In January last year, DP World said it was reviewing all expansion projects and reducing costs due to the global downturn. It was reported to have been part of a drive by Dubai World to eliminate 12,000 jobs. Despite the downturn, DP World has a sufficient cash flow at the moment, Mr Sharaf said. The company's planned listing on the London Stock Exchange by the second quarter of this year remains on schedule, he said. * with reporting by Sarmad Khan