7.5% Growth in 2019
7.5% Growth in 2019
DP World Yarımca is slated to increase its capacity by 30% by the end of 1Q2020 through around USD50 million in investments. Can you outline the investment program?
The USD50 million is as good as spent. We're increasing capacity from 900,000 TEU to 1.3 million TEU chiefly though investing in equipment. The largest share of this investment went towards ship-to-shore gantry cranes and yard handling equipment. The cranes have arrived on site and we are in the process of commissioning them, something that will be done by April 1, 2020. The next largest investment category is yard handling equipment such as robotized gantries (RTGs), which number six in total, and are due to be brought into use by March. We have also invested in internal transport vehicles (ITVs). By April 1, everything will be implemented and we will have the full 1.3 million TEU of capacity that we expect available.
Counter to many figures emerging from Turkey's 2019 economic performance, DP World Yarımca posted strong year-end results. How did you manage strong growth during a down year?
We saw 7.5% growth in 2019, a tough year which saw three consecutive quarters of negative economic growth in Turkey. Our growth was due largely to exports, which we saw grow more than 20% year-on-year. Another factor is the region that we serve within Turkey—which is more balanced in terms of exports and imports than other regions in Turkey. The region is highly industrialized, whereby much of our business is “inputs-for-export," as is the case for the automotive manufacturers that we serve. This runs contrary to terminals located on Istanbul's European side, which depend heavily on domestic consumption-driven imports, and that as a result saw a downturn in 2019. We are still impacted by domestic consumption, and we did see a slowdown in imports that are tied to domestic vehicle sales. More broadly, globalization is taking a bit of a hit, which is of course highly relevant for us.
In 2019, a new rail line linking the Yarımca terminal to the broader regional rail network was completed. What upgrade does this rail line represent compared to previous infrastructure?
Use of the new line has advanced more than we had anticipated. We introduced the line in July 2019 and exceeded our targets for the second half of the year. Turkey is a vast country and cries out for rail solutions. Historically, rail infrastructure has been quite good, but since the 60s and 70s it hasn't received the attention it needs and now pretty much all cargo is handled by truck. There's a huge truck fleet that operates at low cost, but regardless the large beneficial cargo lines (BCOs) prefer mass shipment. That's where our rail line plugs in – we can now reach those areas we couldn't reach before. There's a sustainability component as well – rail accounts for around 30% less carbon emissions than trucks – a consideration gaining relevance for large shippers. As such, I believe that more funds should flow into enhancing rail capabilities and enhancing some of the existing infrastructure. A prime example is the Kars-Tbilisi-Baku connection, which connects Turkey with the so-called “middle corridor" of the Belt and Road Initiative (BRI). In turn, we are seeing demand for us to set up product routes from the CIS area and certain locations in China. This would connect the vital middle corridor to Istanbul and onward to the rest of Europe. DP World is already greatly involved in managing connections in the Caspian Sea region, and there are significant flows to and from this area. If we can containerize them and put them on a train, we'd have a highly sustainable solution.
Which areas of DP World Yarımca's operations are you most excited about?
I'm excited about enhancing and increasing our direct connections to BCOs. We have our trade enabling initiative, that is, we are obviously an operator, but we are presenting ourselves increasingly as a trade enabler. As a group, we have invested over USD2 billion in activities beyond our “core activity," or terminals, which has led to much momentum to connect directly to BCOs. That means connecting in the digital or physical medium all the way to the end user. I'm also excited about identifying opportunities to go further inland beyond our natural scope. We help to move cargo faster, safer and more cost-efficiently through the application of cutting-edge human expertise, innovation and technology. We give cargo owners better control through enhanced visibility through the supply chain. We continue to strengthen our core business of 'trade gateways' (ports/terminals, logistics partners) while diversifying into wider areas of the global supply chain, where disruptive technology is creating new opportunities. We are constantly diversifying into new but related sectors as we work to build both necessary physical infrastructure and a digital virtual platform. Innovation It is part of the company's cultural DNA and central to the Founder's Principles, as we adapt and evolve to drive results and create growth. Innovation is a critical driver of both past success and of future profitable growth. Facilitating global trade on the basis of the motto “Smarter trade, better future", DP World with its partners will start offering services including customs clearance, warehousing and transportation to and from the port in 2020, which helps make global supply chains efficient.
What are your expectations and plans for 2020?
The terminal will return to the double-digit growth figures we experienced prior to 2019. In our first full year of operations, we grew to over 400,000 TEUs, and we kept growing by 25% and 40% after that. We're working to target smaller trade lanes and our initiatives in reaching out to BCOs will start to yield as well. We're very excited about 2020 and 2021 after 2019, which was in many ways a difficult year. We've used this down year to begin investments and prepare for the boost that we expect in 2020. We're already off to a good start this year, and are excited about what's to come.