DP World profits signal global recovery

DP World posted a 10 per cent rise in first-half profits yesterday and forecast an even better second half amid a recovery in global trade and a fragile rebound from the deepest recession since the 1930s. Global shippers and ports operators such as DP World, which is listed on NASDAQ Dubai, are seeing profits rise in concert with a general uptick in trade. AP Moller-Maersk, the Danish shipping giant, yesterday reported profits of 13.4 billion Danish krone (Dh18.49bn) in the first half, reversing a 3.67bn krone loss last year. It also raised its forecast for the rest of the year.

"We are taking a bit of a cautious view on what's going to happen, but we know the second half has always been stronger," said Mohammed Sharaf, the chief executive of DP World, after announcing US$206.5 million (Dh758.4m) in profits for the half. "The fact that Maersk is very positive makes us feel a lot better," Mr Sharaf said. As economies foundered in the initial stages of the financial crisis, the value of global trade in goods and services fell to $3.3 trillion in the first quarter of last year, according to an Organisation of Economic Co-operation and Development index. But trade has since bounced back by 10 per cent to $3.7tn in the first quarter of this year, despite weak economic indicators from the US and Japan.

The US labour department recently reported worse-than-expected job losses for last month and preliminary data this week showed Japan's second-quarter GDP growing at a slower pace than economists hoped. "It's a good performance in a tough environment and I think you can look forward to a stronger second half. Momentum has recovered and overall it's a solid performance," said Redwan Ahmed, an analyst at EFG-Hermes.

Samir Murad, an analyst at NBK Capital in Kuwait, said DP World could suffer if the large economies upon which trade depended lurched into a double-dip recession. With the company's global scale - DP World operates 50 ports in Asia, Africa, Europe and Australia - its fortunes hung largely on global economic trends, he said. "The big risk is if the global economic recovery does not take place as quickly as people are anticipating," Mr Murad said.

In addition to receiving a boost from better shipping volumes, DP World's first-half profits were helped by a cost-cutting drive that saw spending fall by 5 per cent. The company recently began operations at a new terminal in Callao, Peru, and opened another hub in Ho Chi Minh City, Vietnam, late last year. It plans to open ports in Vallarpadam in India and Karachi in Pakistan this year, which combined are expected to raise handling capacity by the equivalent of 2 million containers a year. The company spent $411m on capital improvements and port development in the first half, part of a plan to spend $2.5bn between the beginning of this year and the end of 2012.

Most of DP World's trade in the first half went through Europe, the Middle East and Asia, a broad region the company said "benefited from a relatively stronger performance of container operations in the UAE region but was impacted by the more challenging operating environment in Europe and the decline in non-container revenue in the UAE". The UAE showed a 3 per cent increase in container volumes for the period, yet revenues declined by 12 per cent compared with the same period last year because of falling non-container revenues. Mr Sharaf said that was due to lower income from storage and shipping of construction materials at Jebel Ali, the country's largest port. Activity in Dubai's once-booming construction industry has slowed in the past year, with numerous projects postponed and prices falling by as much as half in some parts of the emirate.

"The revenue in Jebel Ali is mainly non-container volume and general cargo, which is related to construction materials," he said. "Having said that, we have started seeing some slight improvement there." DP World is still committed to a planned dual listing on the London Stock Exchange that the company in June said it would postpone, Mr Sharaf said. Any listing, however, will not happen until after March next year, when the company releases its annual results, he said.

The company is majority-owned by the Dubai Government through Dubai World, one of its largest conglomerates. DP World shares closed up 3.13 per cent at $0.49 yesterday. afitch@thenational.ae

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