DP World looks into expanding operations in Brazil

DP World is looking into expanding its operations in Brazil. The chosen route to do so is still unknown, but alternatives are being contemplated, according to the company’s president in Brazil, Fabio Siccherino.

One alternative being considered is expanding the container terminal in Santos. The plan is to increase capacity from 1.2 million TEUs today to 1.6 million TEUs and then up to 2 million TEUs later. “We are still discussing this possibility, and we should give the final call by the end of the year,” he said. The construction will take 18 months to complete if the expansion is approved.

According to the executive, the company has been monitoring demand growth projections and other projects to expand terminal capacity to determine the right time to invest. “Our understanding is that the time is right [to start the expansion]. We cannot let the demand not be met and then migrate to another port. So we assess that this is a good time to invest,” he says.

DP World, a global giant in the port sector based in Dubai, has been present in Santos since 2013. The company controls a Private Use Terminal (TUP) on the left bank of the port, where it operates containers and, since more recently, pulp.

This new operation, in partnership with Suzano, results from a business diversification strategy, which may be extended to other types of cargo.

Another growth path on the radar is taking the idea of a new grain terminal in Santos off the ground. In November 2020, the company signed a memorandum of understanding with Rumo to study the implementation of the project. However, the deal did not bear fruit.

Now, the company is trying to resume the initiative with other partners, such as agribusiness producers and trading companies. “We are consulting the market and trying to mobilize again. Agribusiness is growing in Brazil, there is a lack of installed capacity in the port of Santos to meet this demand, and we are well equipped to change that,” says Siccherino.

A third expansion route would be door-to-door logistics. This is a global strategy of DP World, which sees the business as the main driver of growth in the future.

“[Door-to-door logistics] is a business transformation process in which the group is no longer just an operator but also a major player in logistics. Here in Brazil, we built the company from the ground up, and we’re growing organically,” he says. This arm is still of minor importance in DP World’s Brazilian operation today. “The pandemic and all the related logistical problems came up when we began to look into it seriously. We are signing agreements with shipowners to guarantee vessel space, so growth should be expected.”

In 2021, DP World Santos recorded net revenue of R$551.5 million, an increase of 35% compared to the previous year. However, the terminal still experienced a loss of BRL 178.5 million, short of the negative result of BRL 389 million in 2020.

The company’s issue is financial, as the majority of its debt is in US dollars. Net debt ended the year at R$2.95 billion, a 6.7% increase over the previous year. The debt was reevaluated when the group purchased Odebrecht’s stake in the company (then known as Embraport) in 2017. However, the situation lingers on.

The company’s president expects that the 2022 results will show greater progress and that there may be a “turning of the tables” for the company.

The group’s long-term vision for Brazil remains positive, according to Siccherino. In fact, there is interest in expanding operations beyond the Port of Santos in other parts of the country.

One project that DP World will certainly evaluate is the privatization of the Santos Port Authority (SPA), which manages the port. “We have looked into it. The company has [similar] experiences outside Brazil. But our the final position will depend on the final format of the tender, the bidding conditions, that have not yet come out,” he says.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/empresas/noticia/2022/09/15/dp-world-estuda-rotas-de-expansao-no-brasil.ghtml

Sharing is caring!