DP WORLD SEES POTENTIAL IN AFRICA DESPITE THE OPERATIONAL RISKS
Chairman says arbitrary takeover of Doraleh terminal in Dibjouti does not bode well for the country and continent
DP World, the world’s fourth biggest port operator, is undeterred by developments in Djibouti, and the company which recorded 7.3 per cent growth in 2017 net income, is looking for more investment opportunities in Africa.
“Africa is a very important market,” DP World’s group chairman and chief executive, Sultan Bin Sulayem said in Dubai on Thursday.
“We know in Africa there are risks and like in any business there is nothing without risks but the opportunities are big. As a company, we are better positioned than many to invest in Africa.”
The Nasdaq Dubai-listed company has faced some challenges in its African operations this year.
Last month, Djiboutian authorities took control of the Doraleh Container Terminal from a DP World entity that designed, built and operated the terminal after winning the concession in 2006. The company has subsequently commenced arbitration proceedings at the London Court of International Arbitration to protect its interests.
Mr Bin Sulayem said Djibouti’s arbitrary move does not bode well for the country and continent.
“As far as Djibouti is concerned, what they have done is unfortunate. The action they have taken,” he said. “It will basically make it more difficult to attract investment in general and banks will be very careful with financing in Africa.”
Mr Bin Sulayem downplayed the headwinds in Somaliland, another African market where the company is investing to develop the Port of Berbera, in the northern region of Somaliland.
Somalia’s lower house of Parliament rejected a tripartite deal by DP World to grant Ethiopia a 19 per cent stake in the port. Mogadishu contests the way the deal was struck, while Somaliland said it has the right to the enter into any commercial agreement.
“It doesn’t really concern us because Somali Parliament has no jurisdiction,” Mr Bin Sulayem said of the parliamentary vote this week, in his first public remarks on the ongoing tiff between the two African governments.
“They can only make noise and they can only make statements but actually on the ground Berbera [Somaliland] has agreements with many countries around the world, with many companies, and it is within their laws.”
Within Africa, DP world is looking at Kenya for investment opportunities and is awaiting the Kenyan government’s decision to privatise Mombasa port facilities. Ports in war-torn Yemen are also on DP world’s radar and it would look at expansion possibilities once the country is safe enough for operations, he said.
“As in any business sometimes expansion efforts work and sometimes they don’t. DP World has successfully expanded its business in many geographies and became a global player,” said Tariq Qaqish, managing director of asset management at financial services company Menacorp.
“Africa does have the potential of growth and if you have the support of African governments, the rewards are there. Each market there has to be evaluated individually.”
The company earlier on Thursday said its full-year profit attributable to shareholders (before separately disclosed items) climbed to $1.2 billion on the back of market share gain and strong volume growth across its global portfolio.
Improvement in global trade is expected to keep the company growing “ahead of the market” as contributions from new developments rise in 2018, the company said in a bourse filing. DP World recorded a year-onyear 15.1 per cent growth in net income on a like-for-like basis at constant currency. Its revenue for the period advanced 13.2 per cent to $4.7bn, while cash from operating activities for the period also climbed to $2.4bn, up from $2bn recorded at the end of 2016, it said.
“Our significant cash generation and investment partnerships, leave us with a strong balance sheet and flexibility to capitalise on the growth opportunities in the industry and deliver enhanced shareholder value over the long term,” Mr Bin Sulayem said.
“We have made an encouraging start to the year with current trading in line with expectations. As we look ahead into 2018, geopolitical headwinds in some regions pose a challenge but we expect to continue to grow ahead of the market and see increased contributions from our recent investments.”
Port operators globally struggled to maintain profitability in the first half of 2017 as global trade expansion was crimped by slower economic growth. Economic activity and trade momentum picked up in the latter half of 2017 as oil prices rose, helping companies such as DP World improve their growth forecast due to increased gross container volumes.
DP World handled 10.1 per cent more in gross container volumes on a reported basis in 2017, and expects the volume expansion to continue in 2018. The company handled 70.1 million twenty-foot equivalent units (TEUs) last year amid broad-based growth across all regions. In the UAE, the company handled 15.4 million TEUs in 2017, up by 4 per cent year-on-year, it said in a February statement.
Beyond Africa, the company is committed to investments in India and is evaluating a deal in Russia, he said without giving the size of potential investment in or the timeline of Russian deal.
The company has commenced arbitration proceedings at the London Court of International Arbitration