ECONOMYNEXT – Sri Lankan ship yard Colombo Dockyard’s losses widened sharply to just over a billion rupees in the June 2019 quarter as it lost business owing to April’s suicide bombings, interim accounts showed.
Sales of the yard, owned by Japan’s Onomichi Dockyard Company Limited, plunged 38 percent to 2.2 billion rupees in the period from a year ago as the bombings worsened a slowdown caused by the prolonged global slump in shipping.
Colombo Dockyard had a loss of 142 million rupees in the June 2018 quarter.
Colombo Dockyard loss per share was 14.92 rupees in the June 2019 quarter. The share last traded at 58.10 rupees.
In the six months to June 2019, the loss per share was 17.52 rupees with the net loss almost 1.3 billion rupees with sales down four percent to 5.9 billion rupees.
The accounts showed that Colombo Dockyard’s losses came from the yard’s shipbuilding business while ship repair turned a profit in the six months to June 2019, albeit slightly lower than the year before.
The group’s heavy engineering business profits also grew.
“In addition to challenging market conditions, the company was adversely impacted by the terrorist attack which occurred in April 2019,” a note to the accounts said.
The bombings, which killed over 250 people, caused a one and half month delay and substantial cost escalation in building of a cable laying vessel (CLV) which was finally delivered to Japan on 23rd June 2019.
Progress of existing two shipbuilding projects for Iraq was negatively impacted and project milestones were shifted, Colombo Dockyard said.
“Ship repair volumes reduced substantially after the incident as the ship owners were reluctant to select Colombo for their repairs due to travel bans imposed by foreign governments and security concerns,” it said.
Also, a new contract for three vessels with a European client the yard was expected to sign by end of April 2019 was cancelled after the attack due to security concerns in Sri Lanka.
The management said it estimated a direct financial impact of 800 million rupees for the first half of 2019, due to the terrorist attack in April 2019.
“However, management is confident that the company will come to positive financial performances in 2020, with improved market conditions, potential shipbuilding orders, capacity improvement in ship repair and heavy engineering segments, cost reductions and productivity improvements.”
(COLOMBO, 16 August 2019)