DUBAI: Dubai-based DP World, one of the world’s largest container port operators, said yesterday it was reviewing all expansion projects, cutting costs and freezing recruitment as growth slows in 2009.
Chief Financial Officer Yuvraj Narayan said DP World did not believe there would be “pronounced job cuts” but was in no hurry to expand through acquisitions until the market stabilizes.
“Under the fast-changing conditions we have initiated a review of all expansion projects that are currently under implementation,” he told reporters in a conference call.
“We don’t have any specific figures in mind. The management has initiated broad measures to cut normal costs like travel ... There is a general freeze on recruitment and a close review of replacements as far as headcounts are concerned.”
Volume growth on consolidated terminals grew 10 percent in the fourth quarter on the same period in 2007, though that was slower than earlier in the year, Narayan said, adding that the results of the expansion review would be completed in a month and the company would announce its results and outlook in March.
DP World, which operates 48 marine terminals and 13 new port developments in 31 countries worldwide, posted a 122 percent increase in first-half profit in August and said business was accelerating in the second half as emerging markets trade mitigated a global economic downturn.
Emerging markets have since been pulled down by crises elsewhere and Narayan said the bullish outlook had changed.
While DP World still expected growth in 2009, with the Middle East and Australian markets still growing despite a slowdown in Europe and Asia, Narayan said it expected “challenging conditions” to remain for the foreseeable future after the global economy deteriorated late in 2008.
The company, in which government investor Dubai World owns the largest stake, said it would remain prudent with its working capital, aiming to mitigate any impact in 2009.
“Overall, the fourth quarter showed a very different picture from the beginning of the year. Only a handful of our ports grew in the fourth quarter compared with the third quarter and compared with 2007,” Narayan said.
“We expect the challenging macroeconomic environment to continue to impact volumes for the foreseeable future. We have therefore implemented a strategy to focus on minimizing the impact on margins and conserving cash.”
DP World shares have lost more than 80 percent of their value since an IPO in November 2007 on NASDAQ Dubai, formerly Dubai International Exchange, when it listed at $1.30 per share. At 0725 GMT, it was down 4 percent at $0.24 per share.
Analysts at Citigroup last week cut the price target for DP World to 50 cents from $1.10 and said 2009 and 2010 may be tough.
DP World was expected to post a 2008 net profit of $505 million, according to a Reuters poll of five analysts.
It was not clear what affect the expansion review would have on growth plans already announced in 2008.
DP World said in November it had signed deals to run two ports in Algeria and won EU permission to form a joint venture for breakbulk services at the Belgian port of Antwerp.
DP World said in July it signed a 40-year lease deal with Australia’s Port of Brisbane.
