Colombo Dockyard losses widen in 2Q

Sri Lanka’s largest shipbuilder, Colombo Dockyard PLC (DOCK), which operates in collaboration with Japan’s Onomichi Dockyard, saw its net losses widening during the April-June quarter (2Q18) amid rise in costs and slowdown in income from its main business activities—shipbuilding and repairing.

The net loss for 2Q18 widened to Rs.142.1 million from a net loss of Rs.36.5 million reported for the corresponding quarter of the previous year. The loss per share further deteriorated to Rs.1.98 from 51 cents.

On quarter-on-quarter basis also the losses widened as the net loss for 1Q18 stood at little over Rs.120 million. But DOCK was able to narrow its losses significantly during the December quarter (4Q17) to just Rs.192, 000.

However, during 2Q18 the group was able to increase its top line by 11 percent year-on-year (YoY) to Rs.3.5 billion, although gross profit fell 34 percent YoY to Rs.279.9 million due to higher cost of sales which rose 18 percent YoY to Rs.3.2 billion.

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.

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.

DOCK celebrated its 44th anniversary on August 1, this year and the company said its shipyard has repaired over 10, 000 vessels and build 245 new ships since its inception in 1974.

Meanwhile, a segmental breakdown of business activities during the first six months of the year (1H18) showed both shipbuilding and repair segments recording lower revenues compared with the previous year.

The shipbuilding business recorded revenue of Rs.2.6 billion for 1H18, down from Rs.3.8 billion reported for the same year last year. The segment reported an operating loss of Rs.39.9 million against an operating profit of Rs. 113 million. The ship repair segment reported revenue of Rs.2.5 billion against Rs.2.8 billion a year ago and saw its operating profit coming down to Rs.374.6 million from Rs.731.9 million.

The heavy engineering was the only business segment that reported positive growth during the quarter under review, with revenues of Rs.621.2 million, up from Rs.360.7 million a year ago and, operating profit of Rs.160.6 million up from Rs.98 million.

 Japan’s Onomichi Dockyard has 51 percent stake in DOCK and the government collectively own about 35 percent of the company through various state-owned institutions.