Chief Executive’s Review

Outlook for 2021

Whereas we have seen many challenges in recent years, the challenges arising as a result of Brexit during the coming year are unprecedented. They are characterised by huge unpredictability and have the potential to fundamentally change the strategic challenges the Company faces.

In both 2019 and 2020, we saw large surges in volumes for the quarter preceding the assumed Brexit date of 31st March 2019 and, subsequently, the actual Brexit date of 31st December 2020.

As a result of the above, the Company’s operating profit in 2019 was €44.2m representing a €3.2m (6.7%) reduction on the previous year when operating profit were €47.4m.

During 2021, the differential between the border control regimes faced by shippers of goods to and from GB using Dublin Port, and those using ports in Northern Ireland, significantly diminishes Dublin Port’s geographical advantages. In addition, the imminent imposition by the UK during 2021 of import border controls on goods being exported on Ro-Ro services from Dublin Port and the reduced attractiveness of the landbridge are similarly combining to Dublin Port’s disadvantage.

The net result of Brexit will be to reduce growth in, or even reduce the absolute level of, Ro-Ro freight volumes on routes from Dublin Port to the ports of Holyhead, Liverpool and Heysham. However, the fallout from Brexit is dynamic and unpredictable and it is impossible to forecast the extent of its negative impact on our volumes. It will take most of 2021 to understand these trends and their long-term consequences.

Offsetting this negative effect, we have seen significantly higher growth on the one-third of our unitised volumes (Ro-Ro and Lo-Lo combined) carried on direct services to Continental Europe and expect this trend to continue during 2021.

The different trends in GB volumes and in Continental European volumes will manifest themselves as a higher proportion of unaccompanied units by comparison to accompanied units. This effect, allied to the loss of 14.6 hectares of scarce port lands to State services for border control facilities, reduces the ultimate capacity of the Port and brings forward the date when Dublin Port will reach its ultimate capacity.

Notwithstanding the unpredictability of Brexit, the lack of significant spare capacity in Dublin Port and in other Irish ports means we must continue to invest, simultaneously, in additional infrastructure based on existing planning consents while also bringing plans forward for yet more developments under Masterplan 2040.

In particular, we will, during 2021, commence pre-application consultation with An Bord Pleanála with a view to applying for a 15 year grant of planning permission for the 3FM Project in 2023. Subject to receiving all necessary consents by 2025, this would allow for the completion by 2040 of all of the infrastructure developments works at Dublin Port as set out in Masterplan 2040. We will also progress with development projects in Dublin Inland Port during the year.

More immediately, we will, during 2021, commence design and procurement work on the first phase of works permitted by the MP2 Project planning grant which we received from An Bord Pleanála in July 2020.

In addition to setting the objective of providing the capacity for projected volumes to 2040, Masterplan 2040 sets a smaller but equally important objective of re-integrating Dublin Port with Dublin City. During 2021, we will complete construction work on the Pumphouse Heritage Zone on Alexandra Road, commence work on the 3.2km Tolka Estuary greenway and bring the 1.9km Liffey-Tolka Project through planning. The dual approach of investing in cargo handling capacity and in infrastructure to support leisure, heritage and culture in Dublin Port has been key in reversing the fortunes of the Port over the past decade.

During 2021, capital investment of €83.7m is planned and, over the five years to 2025, investment of €398.0m is projected. Any reduction of our projected volume growth will reduce EBITDA and will impact on the level of capital expenditure possible within the constraints of our debt covenants with lenders. However, Masterplan 2040 and our capital programme are premised on bite-sized investments and allow us not to over-commit capital spend while also being able to defer future investment if required. During 2021, planned capital expenditure will be kept under continual review from a financial risk perspective. We have the comfort of knowing we can do this based on our experiences and actions in response to the Covid-19 pandemic during the past year.

Building additional port infrastructure is essential if the required throughput capacity is to be provided by 2040. However, it is not, of itself, sufficient and we need to ensure that operators use port lands and infrastructure as efficiently as possible. By European standards, Dublin Port’s cargo throughput per hectare is already very high. However, by 2040 it needs to double and this will require the digitalisation of all aspects of operations in Dublin Port. To this end, we will create an in-house team within the Company during 2021 to plan, procure and implement the required port community systems to achieve this objective.

The development of Dublin Port under Masterplan 2040 can only be accomplished if planning and transport policies are supportive. During 2021, Dublin City Council will progress with the preparation of the Dublin City Development Plan 2022-2028 and the National Transport Authority will similarly work to update the Transport Strategy for the Greater Dublin Area to cover the period 2022-2042. In addition, National Ports Policy is likely to be reviewed during the year. If Dublin Port is to make the required contribution to national port capacity as a major part of the Irish ports system, it will be essential for all of these important policy, planning and strategic elements to be coherent with each other and both supportive of and facilitatory towards the delivery of all of our planned projects under Masterplan 2040.

Finally, notwithstanding the strong financial performance in 2020 - with EBITDA unchanged at €53.9m - we have a large capital investment requirement at a time when many of our customers are under pressure because of Brexit and Covid-19. We did not proceed with planned price increases on unitised goods during 2020 and will similarly maintain pricing levels for these modes during 2021 at their current level.

Against this background, it will be important during 2021 that we continue to control and, wherever possible, reduce our operating costs as we did in 2020 and, previously, in 2019.

Eamonn O’Reilly, Chief Executive

26^th March 2021