Container expansion and grain terminal are on the radar

09/19/2022

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Fabio Siccherino — Foto: Marcelo Justo/Valor

DP World is studying to expand operations in Brazil. The growth route is still under analysis, but there are some paths being studied, according to Fabio Siccherino, the company’s CEO for Brazil.

One possibility under evaluation is to expand the container terminal in Santos. The idea would be to increase capacity to 1.6 million TEUs (20-foot equivalent units of containers) from the current 1.2 million TEUs, and eventually, at a later stage, to up to 2 million TEUs. “It is a project under discussion. There should be a definition by the end of the year,” he said. If the expansion goes ahead, the construction work will take 18 months.

According to the executive, the company has been monitoring demand growth projections and capacity expansion projects of other terminals at the port to determine the right time to make the investment. “Our understanding is that this is the right time [to start the expansion]. We only cannot fail to meet this demand and allow it to go to another port. We believe that this is a good time to invest,” he said.

DP World, a Dubai-based global giant in the port sector, operates a Private Use Terminal (TUP) in Santos since 2013, where it handles containers and, more recently, pulp. This new operation, in partnership with Suzano, is the result of a business diversification strategy that may be extended to other types of cargo.

Another possibility for the company’s growth is to get a grain terminal off the drawing board in the same port. In November 2020, the company signed a letter of understanding with Rumo to study the implementation of the project in Santos. However, the agreement did not go ahead.

Now, the company is trying to resume the initiative with other partners, such as producers and grain traders. “We are sounding out the market and working on that again. Agribusiness is growing in Brazil, there is a lack of installed capacity at the Port of Santos to meet this demand, and we have an asset well positioned for this,” Mr. Siccherino said.

A third development route for the company, which is already underway, is door-to-door logistics. This is a global strategy of DP World, which sees the business as the main growth driver in the future.

“It is a business transformation process, in which the group is no longer just an operator but a major logistics player. Here in Brazil, we created the company from scratch, and we are growing organically,” he said.

Today, this branch still has a small weight in the Brazilian operation. “When we started to prioritize the business, the pandemic and all the logistical problems came up. Now we are signing agreements with shipping companies to guarantee space on the ships, so there should be growth.”

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

The company’s problem is financial since it has a large dollar debt. Last year, net debt totaled R$2.95 billion, up 6.7% year-over-year. In 2017, when the group bought Odebrecht’s stake in the business (then called Embraport), a debt restructuring was carried out. However, the difficult situation persists.

The executive expects that the 2022 results will show a greater advance and that the company is able to turn around.

The group’s long-term vision for Brazil remains positive, according to Mr. Siccherino. There is interest in expanding operations beyond the Port of Santos.

“Brazil has many opportunities, even though it has its problems, some issues of legal insecurity that persist, it is a giant market. I am asked by the group to find opportunities to grow more in the country. Some are being analyzed; whenever a bidding process is announced, we look into it. Not only containers, for example, but also grains. We haven’t seen any opportunity yet, but it is on the group’s radar.”

One project that DP World will certainly study is the privatization of the Santos Port Authority (SPA), the state-owned company that runs the port. “We have been looking into it. The company has made [similar] experiences outside Brazil. But the positioning will depend on the final model and the conditions of the bidding, which are still pending,” he said.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/