DP World outlook bullish as H1 profit doubles

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DP World outlook bullish as H1 profit doubles

DUBAI - Port operator DP World said on Thursday business was accelerating in the second half, as emerging markets trade mitigated a global economic downturn, after first-half profit more than doubled, boosting shares.

By (Reuters)

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Published: Thu 28 Aug 2008, 6:28 PM

Last updated: Sun 5 Apr 2015, 12:02 PM

Still, the shipping industry has reported early indications of weakening growth in some markets, the world's fourth-largest container port operator said.

"In the last few months there are indications of weakening growth in some markets, but we continue to outperform ... and expect 2008 to be in line with expectations," Chief Executive Mohammed Sharaf told reporters in Dubai.

DP World said first-half profit from continuing operations after tax rose to $287 million, up 122 percent from the year earlier. That exceeds a forecast for a headline net profit figure of $277 million, according to a Reuters poll.

Merrill Lynch said in a July note that it expected DP World's net income this year after deducting minorities to be $499 million.

Analysts said the results could buoy shares, which have slumped 34 percent so far this year on concerns of a global economic downturn. "Strong numbers throughout," said Deutsche Bank in a note to clients.

The stock was up 5 percent to $0.84 at 1040 GMT on the Dubai International Financial Exchange, still well below its initial public offering price of $1.30.

But DP World's outlook -- bullish for itself but mixed for the industry as a whole -- may induce some investor caution, one analyst said.

"They're not changing their full-year outlook even though they've beaten expectations in the first half," said the analyst, who declined to be identified. "It (the earnings outlook) is a bit hedged."

Priced rich

Analysts say DP World shares are still highly priced compared with rivals after a long period of unbroken growth, as rising global trade forced a breakneck expansion both for DP World and the ports and shipping sector.

But stockholders have little real-world experience with a downturn in the sector, leading to uncertainty and steep declines in share prices.

With a 2009 estimated price/earnings (P/E) ratio of about 27, DP World shares come at a premium to rivals in the global GICS Marine Ports & Services index, which has a P/E average of about 17, according to Reuters data.

Sharaf ruled out any immediate plans to buy back shares. Shareholders approved a buyback option in May.

Continued growth

Despite the slowdown in Asia, where 70 percent of the group's portfolio is focused, Sharaf said he expected growth to continue in 2009.

The port operator said capacity at the 25 consolidated terminals majority owned or operated rose to 21 percent to 13.6 million 20-foot equivalent units (TEU) in the first half of the year compared with the same period in 2007.

Volumes for all 45 terminals rose 13 percent to 23 million TEUs, it said.

The operator aims to double capacity by 2013 excluding acquisitions.

"In 2007, we added 4 million TEUs of capacity and it's not unreasonable that we could add 1 million to 1.5 million in addition on an annual basis," Sharaf said, adding he expected to add 3.5 million to 4 million TEUs through expansion this year.

Volume growth in the first half was driven by Indian and Middle East ports getting some of the cargo destined for U.S. markets earlier, additional capacity at Dubai's Jebel Ali port, and contributions from new concessions in Senegal and Sokhna, Egypt.

The company was looking at opportunities in Africa and Latin America, Sharaf said, declining to be more specific.

The operator, which has a capital expenditure programme of $4.1 billion up to 2010, has invested about $575 million in the first six months of the year, although that could rise to $1.8 billion for the whole year.

Earnings details

DP World said that during the first half of 2008 it posted:

· Profit after tax from continuing operations at $287 million compared with $129 million one year ago;

· Revenue growth of 32 percent to $1.598 billion compared with $1.209 billion;

· EBITDA up 44 percent to $652 million compared with $454 million one year ago, with margins increasing to 40.8 percent from 37.5 percent;

· Net cash from operating activities of $528 million

· Earnings per share of 1.67 cents compared with 0.78 cent one year ago.


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