ECONOMYNEXT – Sri Lanka’s Colombo Dockyard Plc, a unit of Japan’s Onomichi Dockyard Company has posted a loss of 6.7 billion rupees in the September 2023 quarter, after taking write downs to account for a battering the firm got during a 2022 currency crisis.
Colombo Dockyard reported losses of 94 rupees per share for the quarter, and 137 rupees loss for the nine months on total loses of 9.8 billion rupees in interim accounts filed with the Colombo Stock Exchange.
In the September quarter revenues fell 13.3 percent to 6.89 billion rupees, cost of sales went up 30 percent to 9.7 billion rupees and there was a gross loss of 2.88 billion rupees.
The firm took a write down of 1.8 billion rupees on expected future losses.
Dockyard told shareholders it had moved to high end vessels targeting European customers and won an order for six 5,000 dead weight tonne hybrid bulk carriers for Misje Eco Bulk AS – Norway and a cable laying ship for FT Marine SAS of France.
To penetrate the market, it had quoted prices with low margins.
“This was considered a sensible decision at the time as part of its long-term development strategy and well within its financial capabilities,” Dockyard told shareholders in interim accounts.
It was first hit by the Covid pandemic. In the currency crisis that the firm was hit by fuel shortages, migration of skilled workers and the difficulty in importing material with global price rises also contributing.
“This led to delays in the deliveries of vessels which forced the Company to pay Liquidated Damages as well as to cancel two number of shipbuilding contracts with the payment of compensations,” the firm said.
After the sovereign default, foreign customers did not accept back guarantees from Sri Lankan banks.
“This forced CDPLC to obtain bank guarantees from international banks after keeping 100 percent deposits with these banks as they were not willing to accept any exposure to Sri Lanka at the time,” the firm said.
“CDPLC at the same time was forced to build these vessels out of borrowed funds.
“At the peak of this crisis CDPLC had to deposit over Euro 45 million in international banks earning almost 0% interest, while was forced to borrow in Sri Lanka for rates as high as 29 percent for LKR borrowings and 12 percent for USD borrowings per annum.”
In the nine months to September the Dockyard said it was hit by 2.6 billion rupees of net interest cost and 1,4 billion exchange loss.
Dockyard said it was able to deliver 4 (3 to Norway and 1 to France) of these vessels “to the full satisfaction of its European customers.”
“With the improving country situation and proactive actions taken by the management, the shipbuilding division is expected to be able to better manage its challenges and deliver their vessels on time and on cost in future,” Dockyard said.
“Further, the ship repair business is expected to provide a steady cash inflow, and the management hopes to grow this line of business in the immediate future.
“On the shipbuilding side, the Company continues to build hybrid bulk carrier vessels while aiming for new European business at higher price points, leveraging the reputation built up in these markets.”
Meanwhile Dockyard had revalued its freehold land by 8.7 billion rupees, allowing the firm to end the year with net assets of 6.9 billion rupees. (Colombo/Nov23/2023)
