Taking a “disciplined approach to deploying capital” saw DP World cut back its spending by US$492M in 2018.
DP World’s 2018 Financial Results highlight how the global port operator is looking to diversify its business.
Group Chairman and CEO, Sultan Ahmed Bin Sulayem emphasised the company’s “strong” financial performance despite what he called “the challenging macroeconomic backdrop with trade tensions between US and China dominating the headlines”.
“On a reported basis, revenue grew 19.8% and adjusted EBITDA increased 13.7% with adjusted EBITDA margin of 49.7%, delivering profit attributable to owners of the Company, before separately disclosed items1, of $1,270 million, up 5.1%, and EPS of 153.0 US cents. On a like-for-like basis, revenue grew 4.2%, adjusted EBITDA increased by 6.6% with adjusted EBITDA margin of 54.1%, and earnings attributable to owners of the Company increased 7.6%.”
Most of the revenue growth, however, came from acquisitions, and when these are accounted for in a “like-for-like” revenue comparison with 2017, revenue was up a more modest 4.2%, driven by a 6.3% increase in “total containerized revenue”. Gross container throughput rose 1.9% to 71.4M TEU, and consolidated throughput inched up 0.8% to 37.7M TEU.
Taking a “disciplined approach to deploying capital” saw DP World scale back its capital spending across its portfolio to US$908M in 2018, well under its guidance of $1.4 billion. The company said it “invested in our assets in the UAE, Posorja (Ecuador), Sokhna (Egypt) and London Gateway amongst others. Maintenance capital expenditure stood at $140 million”. The situation, however, appears to be a temporary blip as DP World said it forecasts spending up to $1.4billion in 2019, “with investment planned mainly into UAE, Banana (DRC) Posorja (Ecuador), Sokhna (Egypt) and Berbera (Somaliland).”
DP World added 2.6M TEU of global capacity in 2018 to take its total to 91M TEU. The company anticipates it will have 91.2M TEU of capacity by the end of 2019. At its home port in Dubai, DP World is part way through bringing the new T4 terminal online, a project that features crane automation for the STS and ASC cranes.
DP World’s investment in Jebel Ali, however, comes at a time when throughput is actually falling in the UAE (down 2.7% to 15M TEU for DP World in 2018). DP World referred to this as “the loss of lower margin throughput”, and the result pulled volume across DP World’s EMEA terminals down 1.3% to 22.5M TEU.
That number hides “double digit like-for-like volume growth” at some facilities in Europe and Africa. “London Gateway (UK) and Yarimca (Turkey) continued to ramp up while Dakar (Senegal) and Sokhna (Egypt) delivered a strong performance due to robust regional economic growth”.
Like other terminal operators, DP World is turning its attention to logistics and areas of the supply chain besides marine terminals. In 2018, the company made a series of “strategic acquisitions that offer solutions to cargo owners, and we believe these assets not only provide growth opportunities but importantly add stickiness to some of our existing port volumes”.
These include acquiring Continental Warehousing Corporation (CWC) in India, and Unifeeder and P&O Ferries in Europe. “These assets are highly complementary and combined with our significant port assets, they provide a platform to offer a compelling product to end cargo owners,” DP World said.
DP World will also “continue to invest in our core business of marine container port terminals” this year, and cited its the 30-year concession at Banana in Democratic Republic of the Congo (DRC), its expansion into Chile with the acquisition of two terminals in Puerto Central (San Antonio) and Puerto Lirquen (Region VIII), and taking a controlling stake in DP World Australia as significant initiatives for the year ahead.
“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 9 billion worth of acquisitions announced in the year,” said Sultan Ahmed Bin Sulayem, “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”.