Colombo Dockyard ends 1Q in red as income from shipbuilding slows

Sri Lanka’s largest shipbuilder, Colombo Dockyard PLC (DOCK), which operates in collaboration with Japan’s Onomichi Dockyard, which owns 51 percent of the company, reported a net loss of Rs.120.3 million for the March quarter (1Q18), as the income from both shipbuilding and repairing slowed.   

The company was able to narrow its losses significantly during the December quarter (4Q17) to just Rs.192,000.

The loss of 1Q18 was against a net profit of Rs.144.6 million reported for the corresponding quarter of the previous year. The loss per share for the period was Rs.1.67, against earnings per share of Rs.1.97.

Revenue for the quarter fell 36 percent year-on-year (YoY) to Rs.2.6 billion, while the cost of sales also fell 35 percent YoY to Rs.2.3 billion. 

The gross profit for the period stood at Rs.332.7 million, down 44 percent YoY.

The fall in the global oil price hit DOCK hard as building of offshore support vessels for oil platforms was the company’s specialty. DOCK had to cancel or renegotiate most of the orders placed for such vessels by customers with the fall in oil prices.

DOCK Chairman Toru Takehara in last year’s annual report said he didn’t expect a recovery in the shipbuilding market over the short and medium term. He said DOCK would focus on building niche, high-tech ships as a coping strategy, until the demand for its popular offshore support vessels return to normalcy.

He also noted that despite the recent uptick in oil prices, which is largely due to production cuts from OPEC countries, another year or two would pass before the demand picks up again globally for offshore support vessels.

In line with its immediate focus elaborated by Takahera, DOCK this week said it secured a contract with Toyota Tsusho Corporation (TTC) of Japan to build two vessels: pilot station vessel and buoy tender vessel, for General Company for Port of Iraq (GCPI).

The company is also aiming to bag contracts for cable laying vessels for telecommunication and power transmission, wind farm support vessels, liquefied natural gas storage, bunkering and re-gasification vessels and pilot station vessels.

Meanwhile, a segmental review of DOCK’s business units showed the shipbuilding operations recording revenue of Rs.891.5 million for the quarter, against revenue of Rs.2.2 billion in the same quarter a year ago. The gross profit also plunged to Rs.8.7 million, from Rs.97.7 million. 

DOCK’s ship repairing business recorded revenue of Rs.1.4 billion, down from Rs.1.63 billion a year ago. The segment’s gross profit fell to Rs.215 million, from Rs.420.3 million.

The heavy engineering was the only business segment that reported positive growth during the quarter under review, with revenue of Rs.232 million, against revenue of Rs.65.1 million a year ago. The gross profit rose to Rs.61.2 million, from Rs.9 million an year ago. 

As at March 31, 2018, the state collectively owned about 35 percent of the issued shares of DOCK through various state-owned institutions.