DP World's first half net profits declined 34 per cent to US$188 million, the company said today.
Heavy weather for ports operator DP World
The slowdown in global shipping this year has dragged down Dubai-based DP World's first half net profits, which slumped 34 per cent to US$188 million (Dh689.9m). Volumes for the port operator declined by 10 per cent between January through June worldwide and by 7 per cent at its flagship Jebel Ali terminal in Dubai amid a "very challenging operating environment", said Mohammed Sharaf, the chief executive of DP World, the fourth-largest terminal operator with 49 terminals worldwide. The results were better than the global average decline of 15 per cent, according to Drewry Shipping Consultants in London. Mr Sharaf said the "unpredictable trends in global trade" are expected to continue in the second half of the year, but pockets of growth in its emerging markets businesses should help counter the wider decline in trade. The company is dealing with the sharpest fall in global seaborne trade since containerised shipping was introduced in the 1950s, with global trade volumes expected to decline by 9 per cent this year, according to the World Trade Organisation. The company has responded by reviewing and postponing nearly all of its expansion plans, although it has begun operating new terminals in Djibouti and Algeria, and renewed terminal concessions in Australia. Company officials described the ports operator as well positioned to weather the downturn. It has cash reserves of about $3bn and expects to continue generating $1bn a year from its operations, said Yuvraj Narayan, the chief financial officer of DP World. "As far as financing, we are in a very nice place." DP World also has $7.8bn in debt, with about $3.2bn of that in long-term bonds, said Kareem Murad, an analyst at Shuaa Capital in Dubai. "We are not worried about its debt positon," he said. "With $3bn in cash, its a healthy balance." Mr Murad said DP World's first half earnings meant it was on track to exceed its estimates of $200m in full-year net profits. The company is also considering all options to address its stock performance. The stock is down nearly 50 per cent year-on-year at $0.42, although it has clawed back from its March lows of $0.18. Mr Narayan said he was disappointed with the results and was unsure whether the low price was due to the global financial crisis or its listing on the Nasdaq Dubai bourse. First half revenues were $1.38bn, a decline of 13 per cent from the first half of last year, due to the drop in container activity as well as a 25 per cent decline in its bulk, general cargo and liquids handling units, which comprise a smaller percentage of overall sales. Dubai World, DP World's parent company, was approached about a possible stake sale in the ports firm in May, but there had been no contact with the potential buyer since, DP World executives said. Reports at the time speculated the equity firm was Dubai-based Abraaj Capital. In positive signs, the company said its revenue per container has improved despite the deteriorating market, it has cut operating costs by five per cent and demand picked up in July. Also, United Arab Shipping Company said this week it was raising rates on services to the Arabian Gulf and the Red Sea area after nearly a year of falling prices, suggesting demand could be stabilising. "When shipping lines increase box rates that is good news - the important part is can they sustain it," Mr Narayan said. But with container handling volumes still down, pressure remains on total revenues, Mr Narayan said. "This is mainly due to the fact that shipping lines are seeing their revenues also under pressure." The company may not reach its 2008 revenue levels until 2011, according to Mr Murad. It will also take some time before it resumes its many multi-billion dollar expansion plans around the globe, he said, even as it spends roughly $1.5bn over the next two years to upgrade its terminal network, "A return to its plan really depends on the industry," he said. Mr Narayan, for his part, said it was too early to predict a recovery. "I can see the light," he said, "but I don't know how far away it is." * with agencies firstname.lastname@example.org