DP World’s growing scale and geographic footprint has increased its business resilience

Rehan Akbar, Moody’s VP and senior analyst

The company tends to focus on origin and destination ports, which are relatively less sensitive to cyclical downturns as opposed to transshipment ports Moody’s statement

DUBAI — Moody’s Investors Service has upgraded the long-term issuer rating of DP World Limited to Baa1 from Baa2.

The upgrade comes close on the heels of a ruling by the London Court of International Arbitration that DP World’s concession agreement over Djibouti’s Doraleh Container Terminal is valid and legally binding, rendering the Djiboutian government’s seizure of it illegal.

Djibouti took control of the terminal on February 23, 2018, claiming Dubai-based DP World wasn’t utilising its full capacity. It then signed the China-backed Djibouti International Free Trade Zone in July 2018, the biggest free trade zone in Africa, which DP World claimed violated the 50-year concession agreement.

Moody’s said its decision to upgrade DP World’s ratings reflects a strong track record in managing its business through industry cycles as well as achieving its growth ambitions, while maintaining a healthy financial profile.

Rehan Akbar, a Moody’s vice president - senior analyst, said DP World’s growing scale and geographic footprint has increased its business resilience which Moody’s now sees as more appropriately reflected in the Baa1 rating.

The rating action on DP World reflects its diversified global operations and the positive expected long-term growth in international container traffic. It also reflects its solid profitability and liquidity profile and its expected adherence to leverage targets as proven by management’s track record, the ratings agency said.

Moody’s said the decision was also based on DPW’s flexibility to delay capex to support the balance sheet if needed. “The company tends to focus on origin and destination ports, which are relatively less sensitive to cyclical downturns as opposed to transshipment ports.”

The risk of escalation in trade tensions between the USA and its key trading partners creates significant uncertainty in global trading conditions and is a downside risk for DPW. Moody’s believes the increased uncertainty will adversely impact business confidence and delay investment decisions leading to a weaker global trade outlook in second half of 2018 and potentially well into 2019.

DPW’s direct exposure to export ports in the Far East is limited, with the Pusan Newport Company terminal in Korea and the Saigon Premier Container Terminal in Vietnam the only terminals in that region which are consolidated into DPW’s financials.