Dubai’s DP World hit by higher financing costs and Red Sea crisis
Port operator’s profits plummet 60% but group ‘confident’ second-half earnings will improve
Dubai’s international port operator DP World has suffered a near 60 per cent fall in first-half earnings, hit by a sharp rise in interest payments and the impact of rebel attacks in the Red Sea.
The global logistics company said profits attributable to company owners plummeted 59 per cent — from $651mn to $265mn. Although six-month revenues rose 3.3 per cent on the previous year to $9.3bn, earnings before interest and tax fell by 6.8 per cent, to $1.5bn partly due to the Red Sea disruption.
Chair and chief executive Sultan Ahmed bin Sulayem said on Thursday that 2024 operations had been marred by a “deteriorating geopolitical environment and disruptions to global supply chains due to the Red Sea crisis.”
Government-controlled DP World’s results had been affected by a 40 per cent jump in six-month financing costs from $505mn to $709mn amid higher interest rates. This follows a special dividend of $3.7bn paid last year, which helped increase the group’s debt.
The group said its investment programme had also weighed on earnings — it spent $994mn developing its assets during the first half and expected total expenditure of $2bn for the full year.
However, P&O Ferries owner DP World said it was “confident” second-half earnings would improve.
DP World’s profit hit is the latest sign of how the Houthi attacks have upended global trade, as ships have avoided the Red Sea route, a shortcut for journeys between Asia and Europe.
The supply chain turmoil has weighed particularly heavily on DP World because it generates its largest share of income from the Middle East, Europe and Africa region. The group has invested heavily in promoting its enormous Jebel Ali port as a transport hub for ships transiting the Middle East, before the Houthi attacks prompted customers to bypass the region and take the much longer journey around Africa.
DP World has said, however, that some customers continue to use Jebel Ali as an alternative entry point to the Middle East, dropping off goods here before transporting them across the Arabian peninsula by truck and bypassing the danger zone around Yemen.
Overall, the group said that the volume of goods handled by its business in the Middle East, Europe and Africa dropped 2 per cent in the first six months of the year.
The Houthi attacks have benefited other key trade participants. PSA Singapore, a big port in the city-state, has said its container volumes rose 7 per cent during the first half of the year, as the Red Sea disruption prompted more ships to stop off at its key transit hub for Asian trade.
Meanwhile, profits at large ship owners such as Danish group AP Møller-Maersk have soared as longer journey times led to a shortage of available vessels, driving up the cost of getting containers on ships.
Revenues at DP World’s logistics business, its biggest income generator, were down 2 per cent year on year, to $3.8bn, while logistics earnings before interest, tax, depreciation and amortisation dropped 17.4 per cent, to $595mn. A smaller marine services unit was also hit. But this was partially offset by improved performance by DP World’s ports and terminals division, where first-half revenue grew 14.8 per cent, and ebitda climbed 11 per cent year on year, to $1.8bn.
The company delisted from Dubai’s Nasdaq market in 2020, as it tackled debts at its parent company Port and Free Zone World.
Renewables challenges blow Ørsted’s recovery off course
Investors will want to see evidence of smoother sailing conditions before they climb aboard again
Kitchen sinking can be a good way to draw a line under poor performance. It gets all the bad news out into the market, resets expectations and gives companies the chance to highlight progress. But that exercise only works if it really does spell the end of troublesome surprises. If they keep trickling out, stocks will be blown off course.
That helps explain Ørsted’s plight. The Danish wind energy developer’s shares fell 6 per cent on Thursday as a fresh batch of impairments overshadowed better-than-hoped-for operating performance.
The writedowns were mainly related to a delayed US project and the scrapping of its flagship e-fuels plant, which was intended to supply methanol made by combining hydrogen and carbon dioxide to industries such as shipping and aviation. It did not help that the writedowns were fairly small — at DKr3.2bn (€430mn) — and did not stem from problems in its core job of installing wind turbines: investors wiped more than three times that amount off the group’s market value.
The outsized reaction reflects the fact that Ørsted has only recently taken a long hard look at its portfolio and strategy, after a truly terrible 2023 in which it took DKr28.6bn of write-offs on cost increases and delays in its US projects. In its review in February it scrapped a number of ventures, earmarked others for divestment and cut capex and growth forecasts.
Investors will be wondering whether even the assumptions used in that exercise were cautious enough. At the very least, the emergence of new problems highlights that building big wind projects remains a complex and fraught proposition.
Ørsted’s jittery investors also want reassurance that the group can make progress on the DKr70bn-DKr80bn of divestments that it has promised by 2026 in lieu of raising fresh equity. Progress on this front is essential given it might end the year with DKr80bn of debt including hybrids and debtlike instruments, on UBS estimates. That compares with ebitda of DKr24.5bn at the midpoint of its range, and looks high for a company with chunky future capex requirements and a complex construction programme.
Ørsted may yet encounter fairer winds. In a lower rate environment, the value of its backloaded cash flows will be more valuable to investors. A more benign financing environment might also help it find enthusiastic buyers for the assets it has placed on the block. Operationally, too, it is showing signs of progress, with the installation of almost 2GW of capacity and higher-than-expected ebitda. And, of course, unlike in many other sectors, renewable developers have reasonable certainty over the long-term demand for their product.
But given the buffeting Ørsted’s investors have taken, they will want to see evidence of smoother sailing conditions before they climb aboard again.
US policymakers should embrace MDMA
The Food and Drug Administration’s rejection of MDMA-assisted therapy is a missed opportunity
The US Food and Drug Administration’s rejection of MDMA-assisted therapy is yet another setback in the global mental health epidemic.
MDMA, commonly known as ecstasy, works by suppressing the fear response, allowing patients who suffer from PTSD to observe and reprocess painful memories. Phase 3 clinical trial data from Lykos Therapeutics, the public benefit corporation that filed the MDMA New Drug Application with the FDA, showed that 71 per cent of participants no longer qualified for a PTSD diagnosis after taking the drug, while 87 per cent had clinically meaningful improvements.
This is an improvement compared to antidepressants, which on average have a 20-30 per cent complete remission rate and 60 per cent response rate.
MDMA primarily increases the release of serotonin and norepinephrine. Serotonin is crucial for regulating mood, sleep, pain, appetite and other functions, and the increased release of serotonin contributes to MDMA’s mood-elevating effects. It also affects the norepinephrine system, which contributes to emotional excitement, euphoric feelings and cognitive impairment.
The FDA faces many challenges when evaluating psychoactive drugs. It is concerned about abuse of these drugs and has criticised Lykos data. But better mental healthcare treatment is required. Six out of every 100 people in the US will suffer from PTSD at some point in their lives. Yet there have been no new prescription medicines since two antidepressants, Zoloft and Paxil, were approved for this use by the FDA 25 years ago.
MDMA was developed in 1912 by a Merck chemist. It is one of a number of historical healing practices resurfacing as empirical research supports their efficacy.
Egyptian medical papyrus dating back to around 1550BC suggests cannabis may have been used then to treat inflammation, for example. There is also archaeological evidence of psychedelic medicine use in both Central America and Europe.
Some 40 per cent of the drugs used in western medicine are already derived from plants that have been in use for centuries, including the top 20 best selling prescription drugs in the US today.
We should continue to look backwards in order to move forwards. The current approach towards healthcare is not working. We are not well as a society and the cost is high. Mental illness costs the US economy $282bn a year, according to a study published this year by the National Bureau of Research.
The US is in the grip of a mental health epidemic.
Patients are ready to try alternatives. Last year, a University of Michigan survey found that 80 per cent of adult patients aged 50-80 would be open to stopping one or more of their long-term medications if a doctor said it was possible.
The problem is that once people are on these drugs, withdrawal can be severe. Frontier wellness companies like Outro have developed “hyperbolic tapering”, a process to help people get off of antidepressants with minimal withdrawal while reducing the risk of relapse. Their objective is to create a world where people are empowered to think about their mental illness as recovery, not a life sentence.
Such innovations require reimagining wellness beyond the status quo. So does psychedelic medicine.
For now, the millions of Americans with PTSD and the patients who aren’t responsive to existing treatments have to bear the burden of waiting for new treatment to be approved.
But this is not a one-off project. The FDA has a pipeline of around 95 psychedelic drugs currently in pre-clinical to phase 3 studies. It makes you wonder what other ground breaking wellness modalities are stuck in regulatory limbo?