7 Dubai – Daily News from Dubai to the world

DP World, the global terminal operating arm of Dubai World, has started 2009 with a decline in consolidated throughput across its network, with an average slowdown of eight per cent registered in the first two months of the year.

Despite announcing strong results for 2008, company officials said the volume deceleration witnessed in the last quarter of 2008 had continued into early 2009 with no signs of easing in the foreseeable future. The company considers its current market valuation disappointing and will call a board meeting in the coming months to evaluate available options to address the situation.

The company results announced yesterday showed profit after tax for continuing operations rising by 48 per cent to $621 million (Dh2.28 billion), while revenue growth increased 20 per cent to $3.3bn.

The company’s consolidated throughput grew at 15 per cent to 27.7 million TEUs (twenty foot equivalent units) in 2008 compared to 24 million TEUs in 2007.

“It is difficult to comment with certainty about our projections for this year since forecasts are being adjusted almost on a daily basis,” said Mohammad Sharaf, Chief Executive Officer of DP World.

“But our business model has the flexibility to adapt to these turbulent market conditions by focusing on cost containment, maximising cash generation and minimising the impact on margins and profitability.”

The company is aiming for a three per cent cost reduction through increased efficiency in its operations.

Sharaf said the company had carried out some minimal lay offs in some regions but noted that it was initially pursuing non-human related cost-cutting measures.

He said while cash generation was important at this stage, the company had no plans to access the government or shareholders for financial support.

However, Yuvraj Narayan, DP World’s Chief Finance Officer, said the company would not rule out re-listing on the financial market, although it considers this a very distant option.

As a result of falling utilisation rates across container terminals globally, DP World will also defer up to 50 per cent of all new capacity until demand recovers. The company will go ahead with projects nearing completion such as Peru and Ho Chi Minh City and also invest more in terminals that joined its portfolio in 2008.

“We continue to focus on new terminal facilities that are in the final stages of completion such as Callao in Peru and Ho Chi Minh City in Vietnam, which are due to open later this year or early next year,” said Sultan Ahmed bin Sulayem, Chairman of Dubai World.

“Those ports that joined our portfolio in 2008 will benefit from investment to ensure the receive appropriate equipment to develop them into cost efficient, higher margin terminals,” he said, adding that capital expenditure for 2009 would be in the region of $800m.

All the other projects including the $2.2bn London Gateway and the planned Jebel Ali Port Terminal 3 will remain under review.

Sharaf said while their terminals in developed regions were registering double digit declines in volumes, the performance in the UAE and most of the Middle East continues to be less impacted.

The Europe, Middle East and Africa (Emea) region was the best performing of all regions despite the decline in volumes in Europe in the second half of 2008 due to the contribution of volumes from new terminal additions and strong growth at Dubai ports.

Container throughput at Jebel Ali Port increased to 11.8 million TEUs last year and the number is expected to improve this year with the opening of Terminal 2, expected to add a capacity of five million TEUs.

Last week, DP World officially took control of operations at the port of Algiers, now known as DP World Djazair, as part of its 30-year concession to develop the two ports of Algiers and Djen Djen in Algeria.

In February, DP World opened its ultra modern container terminal at Doraleh in Djibouti with a capacity of 1.2 million TEUs, expanding its African network.

Sharaf said the company would work to ensure efficiency to clients but noted that as policy, it had no plans to reduce port tariffs across its portfolio.

DP World recently announced that it would make no changes to its existing port charges.