SL’s financial market woes defy Colombo Dockyard growth targets

Colombo Dockyard 

• Colombo Dockyard says it remains cautiously optimistic that the country’s financial market will continue to stabilise
• Points out external pressure from global challenges as well as the lingering effects of Sri Lanka’s financial crisis negatively impacted its financial performance

The global market demand for ship building and ship repairs looks promising in the near future. However, financial market problems in Sri Lanka will continue to pose a challenge to the growth targets of Colombo Dockyard PLC.

The entity, which operates as Sri Lanka’s largest engineering facility leading in the business of ship repairs, shipbuilding, heavy engineering and offshore engineering with a Japanese collaboration said it remains cautiously optimistic that the country’s financial market will continue to stabilise. 

In the meantime, Colombo Dockyard will continue to build on the market recognition gained in 2023 to pursue future prospects. 

“We will adopt a blend of penetrative market and product development approaches to increase profitability. While we expect our journey of growth to be slow-paced, we are confident of achieving end goals,” Colombo Dockyard PLC Managing Director/CEO Thimira S. Godakumbura said in his message in the annual report for 2023 released this week.

He noted that at present, Colombo Dockyard is on a steady path of growth in the ship building, ship repair, heavy engineering and yard development sectors. 
“We will continue to remain market responsive and prudent to achieve long-term growth and create value for all our stakeholders.

External pressure from global challenges as well as the lingering effects of Sri Lanka’s financial crisis negatively impacted the company to experience a loss of Rs. 11,127 million for the 2023 financial year. 
The Group recorded a total revenue of Rs. 36,167 million, marking a growth of 33 percent (Rs. 8,875.9 million) compared to the previous year’s revenue of Rs. 27,291 million. 

Shipbuilding revenue in particular surged by 76 percent, while ship repairs revenue saw a more modest increase of 9 percent. Ship repair revenue alone amounted to Rs. 15.8 billion in 2023, demonstrating an improvement over the previous year. 

The group’s export revenue primarily comes from its shipbuilding and ship repair activities. In 2023, the total export revenue for the group amounted to Rs. 31,724.5 million, marking a notable increase of 36% compared to the previous year’s export revenue of Rs. 23,308.07 million.

The Group’s earnings before tax, depreciation, and amortisation amounted to Rs. 12,849 million, a significant decline from the previous year’s earnings of Rs. 1,347 million. Despite achieving a 32 percent increase in revenue compared to 2022, the shipbuilding sector’s poor performance was the primary reason for this negative earning and the factors contributing to this downturn included the country’s economic crisis, country’s defaulting on debts, disruptions in the global supply chain, high interest rates on local and foreign loans and rapid fluctuations in exchange rates.

Other income of the Group was Rs.478.4 million during the year 2023 and the scarp sale income is the major contributor which represents 69 percent of other income.

In 2023, Dockyard General Engineering (Pvt) Ltd accounted for 9 percent of the total group revenue, Dockyard Total Solutions (Pvt) Ltd contributed 1 percent, and Ceylon Shipping Agency contributed 7 percent. Heavy Engineering sector contributed Rs.2,963.6 million to the group revenue during the year 2023.

The share price of the company as at 31st December 2023 stood at Rs. 50, showing a decline of 15 percent compared to last year’s closing price of Rs. 59.