AD Ports Group announced its financial results for the third quarter of 2023, reporting revenue growth of 189% YoY to AED 4.24 billion, which included the effect of M&A activity and notably Noatum’s Logistics, Maritime, and Ports businesses. Revenue growth reached 113% YoY on a LFL basis, excluding effect from M&A activity, according to the company's release.
Four of the five clusters - Logistics, Maritime & Shipping, Ports, and EC&FZ - were key growth drivers of the top line, with 546%, 264%, 71%, and 20% YoY performance, respectively.
AD Ports Group Q3 2023 EBITDA rose by 28% YoY to AED 759 million, largely supported by the acquisition of Noatum and Karachi Gateway Terminal (+2% YoY on a LFL basis). Higher contributions from the relatively lower-margin Maritime & Shipping and Logistics businesses resulted in further EBITDA margin dilution to 17.9% for the quarter vs. 40.5% in Q3 2022. The Group maintains its EBITDA Margin guidance of 25-30% in the medium term as it expects the revenue mix to continue to rebalance while it continues to invest heavily, both organically and inorganically, in the foreseeable future. The Group also expects its operating profitability to rebalance as it gradually delivers on extracting synergies from densifying our vertically integrated ecosystem and scaling up operations.
The Maritime & Shipping Cluster remained the Group’s biggest revenue contributor and has become the largest EBITDA contributor too, accounting for 56% and 33% in Q3 2023, respectively, benefiting from Noatum Maritime contribution and opportunistic vessel trading activities.
Total Net Profit surged by 20% YoY to AED 403 million in Q3 2023, in line with EBITDA performance.
The Group’s negative Net Operating Cash Flows of AED 579 million were impacted by a temporary deterioration in working capital in relation with the vessel trading activities. The Group expects Net Operating Cash Flows to recoup this negative performance in Q4 2023 when the associated cash collection takes place.
The Group’s Capital Expenditures (CapEx) reached AED 800 million in Q3 2023, putting the total year-to-date outlay at AED 3.65 billion, in line with our front-loaded AED 15 billion capex programme between 2023 and 2027 (five-year period).
Net Debt to EBITDA ratio stood at 4.0x at the end of Q3 2023 for the exact same reasons mentioned above to explain the Net Operating Cash Flows performance, i.e. the temporary impact from vessel trading activities. The Group expects leverage to normalise in the last quarter of the year.
The Maritime & Shipping Cluster reported another impressive performance, with revenue growth of 264% YoY to AED 2.44 billion (+232% YoY on LFL basis), primarily driven by opportunistic vessel trading activities in the shipping segment, and by the marine services segment, which included the consolidation of Noatum’s Maritime business. Feedering container volumes continued to be strong, with +30% YoY, driven by capacity increases.
The Economic Cities & Free Zones Cluster reported a 20% YoY growth to AED 443 million (-7% YoY on a LFL basis), mainly driven by KEZAD Communities, warehouse leases and utilities. An additional 0.4 sq km (net) of new land leases were added in Q3 2023, taking the total year-to-date new land leases to 2.0 sq km and the total land leased under the EC&FZ Cluster to 66.5 sq km. Both KEZAD Communities and warehouse revenue performances were primarily driven by higher utilisation. The LFL performance was impacted by lower utilisation of the Razeen staff accommodation as it ceased to be used for COVID-19 isolation and quarantine purposes from Q1 2023 onwards. Since then, the Razeen facilities have been gradually ramping-up occupancy, but commanding lower rates.
The Ports Cluster reported Q3 2023 revenue growth of 71% YoY to AED 487 million (+8% YoY on a LFL basis). Operational KPIs were once again supportive, with container volumes growing 19% YoY (+17% YoY on a LFL basis) to 1.36 million TEUs (twenty-foot equivalent units) on the back of both higher capacity (with KGTL and Noatum) and improved overall container utilisation to 56%, up from 54% in the base quarter. Ro-Ro volumes soared 651% (+49% YoY on a LFL basis) while general cargo volumes increased 25% (+6% YoY on LFL basis).
The Logistics Cluster transformed to be a global player following the completion of the Noatum acquisition, with revenue increasing more than fivefold to AED 852 million (+4% YoY on a LFL basis). In terms of operational KPIs, Ocean Freight volumes were up 5% YoY, Air Freight volumes declined 28% YoY, and Polymers volumes grew 10% YoY.
The Digital Cluster reported an 11% YoY increase to AED 100 million (+5% YoY on a LFL basis), supported by 7.73 million revenue-generating single window transactions and rate increases for certain services. The drop in Q3 2023 volumes was the result of lower services to internal stakeholders.
In early October, Noatum announced the acquisition of Sesé Auto Logistics for a total purchase consideration (Enterprise Value - EV) of EUR 81 million. The transaction is expected to be completed by Q1 2024, subject to regulatory approvals.
Sesé Auto Logistics is engaged in road and rail transport logistics of light and heavy vehicles, operating from five main European countries, namely Spain, Germany, Poland Czech Republic, and Hungary, with a fleet of over 200 trucks that cover more than 30 million kilometres annually across Europe. The company serves leading Original Equipment Manufacturers (OEMs), including Renault, Stellantis, Mazda, Daimler, BMW, PSA and MAN, among others.
Noatum also announced the divestment of its 27.9% minority share in Barcelona Container Depot Service Group (BCDS), a company specialised in storage, maintenance, repair, and cleaning services of dry and reefer containers as well as ISO tanks, which resulted in a one-off gain of AED 39 million booked in Q3 2023. Another one-off gain related to grant amortization was booked during the quarter with a positive impact of AED 92 million, while the exact same total amount of AED 131 million was recorded as one-off losses, mainly from increased pension liability and deferred tax liability as per new UAE CT law, which yielded to a perfectly neutral impact on the bottom line.
Last week, AD Ports Group acquired 10 offshore vessels for around AED 735 million (USD 200 million), boosting its offshore & subsea capabilities in the Middle East and Southeast Asia by around 20%. All 10 vessels are expected to be delivered in Q4 2023 with financial consolidation taking place from Q1 2024 onwards. AD Ports Group will take over well-established contracts with blue chip clients in the O&G industry, National Oil Companies, and International Oil Companies in the Middle East and Southeast Asia. The transaction supports AD Ports Group’s strategy to continue to balance its portfolio of Maritime businesses with assets and services exposed to different market forces and cycles, thereby limiting its performance volatility, amidst forecasts of an upward trend in the offshore O&G market over the medium-long term.
As for GFS acquisition, AD Ports Group still expects to close the transaction by the end of the year, with financial consolidation taking place from Q1 2024 onwards.