• Home
• /
• Local business

DP World to Review Expansion Projects, Cut Down Costs

DUBAI - Dubai-based DP World, one of the world’s largest container port operators, said on Monday it is reviewing its expansion projects, trimming costs and will stop hiring this year amid the global economic recession.

“With the fast-changing conditions, we have initiated a review of all expansion projects that are currently being implemented. It is too early to give numbers, but we are conserving cash and making sure capacity actually comes on line related to the market demand,” Yuvraj Narayan, DP world chief financial officer told reporters in a conference call.

He said DP World at this point is waiting for the market to stabilise before pushing through with its expansion plans.

Narayan said despite the difficult macroeconomic conditions, DP World does not expect job cuts to be pronounced.

He said the results of the expansion review would be announced sometime in March. “While volume growth was very strong in the first half, the slowing macroeconomic environment in the second half has impacted volumes at many of our terminals, especially in the final months of the year,” said Narayan.

In the fourth quarter, volume growth grew 10 per cent from a year ago, pulled up by its flagship terminal in Jebel Ali which for the first time posted one million TEU (twenty-foot equivalent container units) in October and November.

The growth however, was slower compared to the previous quarters said Narayan. “Fourth quarter showed a different picture, only a handful of our terminals grew compared to the other quarters,” said Narayan.

DP World in the first half said throughput growth rose 21 per cent to 13.6 million TEU compared to the same period in 2007, with improved volumes from its terminals in Australia, India and the Middle East.

For the full year, volume grew 8 per cent from 2007 to 46.8 million TEU.

For 2009, DP World expects the grim macroeconomic picture to “continue affecting volume growth in the foreseeable future.”

Narayan said volume growth will remain strong this year in the Middle East and Australia, but the slowdown will be felt sharply in key emerging markets in Asia and Europe.

“We remain confident of the long-term prospects for the industry and we see the opportunity to play catch up in the next two years in areas where capacity is lacking, but there will be locations where we will see a possible decline in demand for a short period.”

DP World operates 48 terminals and 13 new developments across 31 countries. The port operator has a global capacity of more than 54 million TEU which it sees increasing significantly in the coming years.

UBS Investment Research and Citigroup have recently cut their price estimates for DP World as the global economic recession may significantly reduce throughput volumes for the port operator.

UBS maintained its “neutral” rating on DP World but slashed its target price to $0.29 from $0.40. Citigroup also cut its price estimate to $0.50 from $1.10 and rated it a “medium risk/buy.”

“The increasing headwinds suggest share price is likely to underperform in the near term on the prospect of significant downgrades, worsening industry and the likelihood that the company will revise 2009 guidance downward,” said UBS.

“We expect 2009 and 2010 to be tough,” said Citigroup.

DP World shares on the Nasdaq Dubai closed flat at Dh0.25.

· rocel@khaleejtimes.com