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DP World’s H1 Profit Falls 34pc on Drop in Container Volumes

DUBAI — Dubai-based container port operator DP World reported that its first-half profit after tax from continuing operations fell by 34.4 per cent to $188 million, due to a downturn in cargo volumes handled at its terminals around the globe.

The number of shipping containers loaded and unloaded at DP World facilities dropped by 10 per cent from the first half of last year, reflecting the worldwide decline in trade flows during the recession, DP World Chief Executive Officer Mohammed Sharaf said in a conference call on Thursday.

The company earned an after tax profit from continuing operations of $287 million in the first half of 2008.

“Looking ahead, the unpredictable trends in global trade we have seen in the first half of the year continue into the second half of the year,” he said.

Revenue declined by 13 per cent to $1.38 billion from $1.60 billion in the same period of 2008. Consolidated throughput dropped to 12.3 million twenty-foot equivalent container units, or TEU, from 13.6 million last year.

DP World’s net debt as of June 30, 2009, was $4.79 billion compared with $4.22 billion at the end of 2008. The port operator said the increase in net debt was a result of continued investments.

“The first six months of 2009 have continued to present a very challenging operating environment across the portfolio,” the company said in a filing to Nasdaq Dubai earlier on Thursday.

In the UAE region, DP World reported a decline in volumes of seven per cent to 5.4 million TEU. Container operations showed resilience to the global economic downturn, resutling in only a small decline in profit margins. Most of the hit to profits resulted from a 25 per cent decline in revenue from general, break-bulk and bulk cargo, Sharaf said in the filing.

Despite the 10 per cent decline in container volumes, EBITDA — or earnings before interest, tax, depreciation and amortisation — margins remained strong at 38.7 per cent.

In one of the harshest years ever for the container handling industry, Nabil Ahmed, an analyst at Deutsche Bank’s Global Market Research, said that DP World’s performance reflected better-than-expected pricing and successful cost controls. “Initiatives to remove fixed costs were impressive and should continue to bear fruit,” he said in an investor note.

Ahmed set a new target price at $0.57 per share for DP World, up from the current $0.40. He said that DP World had been a massive under-performer, both relative to the port sector and to the Dubai main share index, since the announcement of a private equity interest to acquire a minority stake in the company in May.

“This factor brings us to the conclusion that the speculative appeal that pushed the stock to its recent high point has faded away, given the absence of a deal,” the analyst said.

Sharaf said his company’s portfolio had benefitted from a focus on emerging markets, and that the UAE has continued to deliver a solid performance as the gateway for trade to the Gulf and Middle East.

· issacjohn@khaleejtimes.com