International box terminal mega-operator, DP World, has announced a very solid set of results for 2018. Revenues, earnings before interest taxation depreciation and amortization (EBITDA), and net profits all substantially increased last year compared to 2017.
Revenues for 2018 stood at US$5.65 billion, which was 19.8 percent up on the 2018 figure of US$4.72 billion. That’s a difference of US$930 million. Growth in revenues was attributed to acquisitions (for more details, see below). Also driving revenues was a small increase in container volumes and a small increase in containerized revenues. DP World reports that like-for-like revenue increased by 4.2 percent, driven by a 6.3 percent increase in total containerized trade.
Gross TEU throughput in 2018 stood at 71.42 million TEU, which is 1.9 percent up from the 2017 figure of 70.08 million TEU. Box volumes in the United Arab Emirates were 15 million TEU in 2018, down 2.7 percent year on year, a situation that was described as “soft”.
“Our Europe and Americas portfolio saw strong growth with continued ramp-up in London Gateway (UK), Yarimca (Turkey) and Prince Rupert (Canada), while performance in Africa remains robust driven by Dakar (Senegal) and Sokhna (Egypt).
“In the UAE, the softer volumes were due to the loss of low-margin throughput, where we remain focused on high margin cargo and maintaining profitability,” said Sultan Ahmed Bin Sulayem, Group Chairman and CEO, DP World.
On a gross volume basis, Asia Pacific and India handled 32.9 million TEU, up 3.2 percent on the previous year. DP World terminals in Europe, the Middle East and Africa, handled 29.46 million TEU, up 3.1 percent on the 2017 figure. Terminals in the Americas and Australia handled 9.04 million TEU, which was 0.9 percent up on the previous year.
Profitability
EBITDA increased by 13.7 percent to stand at US$2.81 billion in 2018, up from the figure for the previous year of US$2.47 billion. That’s a difference of US$340 million. EBITDA is important as it indicates the underlying operating profitability of a company because it removes the impact of interest and accounting decisions. Profit attributable to the owners (i.e. net profit) stood at US$1.27 billion, up 10.2 percent from the 2017 figure of US$1.18 billion.
Acquisitions last year
DP World is an acquisitive organization. Last year it bought fellow state-owned enterprises Drydocks World (a large ship repair yard in Dubai) and Dubai Maritime City (a maritime-focused real estate precinct in Dubai) for a total of US$405 million. It also bought Cosmos Agencia Maritima (a Peruvian riverine and maritime multi-service provider) and Continental Warehousing.
DP World also bought Unifeeder (a large European short-sea shipping and logistics company), which operates a chartered-in feeder fleet of 38 vessels that range in size from the 508 TEU-capacity “Marja” to the 2487-TEU capacity “CMA CGM Neva”. Unifeeder makes about 8,000 port calls to 46 ports across Portugal, Spain and countries bordering the English Channel, the North Sea and the Baltic.
DP World said that acquisitions are performing “in line with expectations and we have seen increased contribution to our revenue line”. It further commented that synergies derived from the acquisitions would improve earnings in the years to come.
“This robust performance has been delivered in an uncertain trade environment, once again highlighting the resilience of our portfolio. We have made good progress in delivering on our strategy of strengthening our portfolio to become a global solution provider and trade enabler with approximately $2.5 billion worth of acquisitions announced in the year. These acquisitions offer strong growth opportunities and enhance DP World’s presence in the global supply chain as we continue to diversify our revenue base and look at opportunities to connect directly with the owners of cargo and aggregators of demand. Going forward, we aim to integrate our new acquisitions and drive synergies across the portfolio with the objective of removing inefficiencies in global trade, improving the quality of our earnings and driving returns,” the group said in a statement.
2019 purchases
The group has made several acquisitions already in this calendar year. It has acquired two terminals in Chile for US$520 million. These are Puerto Central, a gateway to the capital, Santiago, and Puerto Lirquen (260 miles south-south-west of Santiago, near the city of Concepion). Puerto Central is a multipurpose terminal and a one million plus TEU capacity facility. Lirquen is also a multipurpose facility, handling boxes, break bulk and dry bulk.
“These new assets will allow DP World to serve cargo owners and shipping lines at five key gateways on the west coast of South America in Posorja (Ecuador), Callao and Paita (Peru) and San Antonio and Lirquen,” Bin Sulayem said.
Meanwhile, in late January this year, DP World upped its stake in DP World Australia which is the operator of terminals in the main Australian container ports at Brisbane, Sydney, Melbourne and Fremantle. DP World (global) does not own DP World Australia outright.
The price that the global group paid was not disclosed, however, the group noted that the deal puts an enterprise value of US$997 million on DPW Australia.
DPW Australia handled 3.4 million TEU in 2017 and generated over US$400 million of revenue. DPWA hopes to grow the business via DPW Logistics Australia and through joint ventures.
“We remain optimistic on the growth prospects in Australia and believe there is an exciting opportunity to enhance shareholder value by further developing the container terminals operations and expanding beyond the ports into logistics services,” Bin Sulayem said.
Investment plans
Looking forward, the group envisages substantial investment around the world with US$1.4 billion of capital expenditure planned for the United Arab Emirates, Posorja (Ecuador), Berbera (Somaliland), Dakar (Senegal) and Sokhna (Egypt). The group has also won a 30-year concession to manage and develop a greenfield port at Banana, on the Congo River, in the Democratic Republic of Congo, Africa.
Commenting generally, Bin Sulayem said: “[The] year has started with trading in line with expectations and whilst the near-term outlook remains uncertain with the trade war and geopolitical headwinds, we expect our portfolio to remain resilient and see increased contributions from our recent acquisitions and investments.”
DP World is headquartered in Dubai in the United Arab Emirates and is listed on Nasdaq Dubai. The market appears to have reacted favourably to DP World’s results as the share price rose from US$15.40 to US$16.35 within a day. At the time of writing, the DP World group operates 78 marine and inland terminals, in 40 countries around the world. It employs 45,000 people and serves over 70,000 vessels each year, moving 174,000 containers every day.
In the Americas it operates box terminals in Peru, Argentina, Ecuador, Brazil, Dominican Republic, Suriname and Canada. It does not operate any terminals in the United States following a major controversy in early 2006. DP World had bought P&O, a British maritime company, that operated several ports in the U.S. Many objections were made by the commentariat to the effect that, because DP World is a UAE-government owned entity, operation of U.S. ports by DP World could potentially compromise U.S. national security. DP World later sold its U.S. assets.
The group has an extensive presence in Europe, India, East and South East Asia and Australia. It also has many interests in Africa and Latin America.
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