DP World chief brushes off protectionism concerns over global trade

DP World’s Jebel Ali Free Zone helped the global ports operator increase earnings last year. Courtesy DP World

Sultan bin Sulayem, DP World's chairman, brushed off concerns about the prospect of increased protectionism damaging global trade, particularly in the US.

Speaking on a call to journalists after the company reported its annual results, Mr bin Sulayem said: “It is my belief that when the Americans … or Donald Trump talks about trade and free trade, he talks about fair trade. He is trying to balance trade with other countries. He wants other countries to open their markets, like China.”

At a Group of 20 meeting over the weekend in Germany, the United States had pushed, unsuccessfully, for an explicit pledge to ensure trade is fair but the finance chiefs of the world’s largest economies ultimately left out any promise to avoid all forms of protectionism.

In a statement yesterday, Mr bin Sulayem said that DP World expects global trade “to remain resilient, even in an era where there is much discussion about protectionism and increasing trade barriers”.

For the past year, the ports operator said profit attributable to its parent company, on a reported basis, was US$1.13bn – a 27.6 per cent increase on the $883 million generated in 2015, but this was partly because of the strengthening US dollar. On a like-for-like constant-currency basis, profit increased by 6.2 per cent. Similarly, revenue was up by 4.9 per cent to $4.16bn but on a like-for-like constant-currency basis, the increase was 1.3 per cent. Gross throughput at its ports increased by 3.2 per cent during the year to $63.7bn, which Mr bin Sulayem said was ahead of the industry average forecast of 1.3 per cent by analyst Drewry.

DP World anticipates growth in the low single digits this year and Mr bin Sulayem said that this is partly owing to the improved fortunes of the shipping lines – many of which posted “terrible” results last year.

“What makes me more optimistic is that our customers are doing better,” he said. “In the beginning of the year, we’ve done very well. We expect to do better than the analysts … expect [the industry to do this year].”

Drewry has not yet published its 2017 global forecast for port throughput but the Drewry analyst Victor Wai told The National that it is expected to be somewhere between 2 and 3 per cent.

DP World is planning to spend up to $1.2bn on its port network this year, expanding capacity at Jebel Ali in Dubai, London Gateway, Dakar (Senegal), Port Rupert (Canada) and Berbera (Somaliland). This is a slight decline on the $1.3bn spent in 2016, during which gross capacity increased by five million twenty-foot equivalent units (TEU) to 85 million TEU.

Mr bin Sulayem said that both 2014 and 2015 represented sizeable years of investment for DP World, “but our return on capital employed of over 9.5 per cent in 2016, compared with 7.9 per cent in 2015, [showed] that our investments have delivered results”.

The company signed a number of deals last year including MoUs in Georgia, Kazakhstan and Azerbaijan, a joint venture agreement with the Russian Direct Investment Fund and an agreement with Canadian pension fund CDPQ.

Mr Wai said that DP World beat sales and earnings forecasts, which he attributed to a stronger performance from the Jebel Ali free zone, acquired by DP World in 2014.

Although DP World had previously sold a stake in a container terminal in Russia in 2012, Mr Wai said a recent thawing in global diplomatic relations with Russia had strengthened cargo volumes previously affected by sanctions.

“Given the depressed valuations and the low container penetration rate, it makes sense for DP World to look to Russia again,” said Mr Wai.

Follow The National's Business section on Twitter