The slump in global crude prices has started to bite into the shipbuilders around the world and as a result the Sri Lanka’s Colombo Dockyard PLC (DOCK) has seen its contracts being cancelled while being forced to renegotiate the remaining, a process that has hurt the company’s financial position. In statement, DOCK, the local unit of Japan’s Onomichi Dockyard Company Limited said the company had to cancel some of the contracts and offer milder terms and conditions to customers engaged in the offshore drilling industry.
DOCK, which had entered into multiple contracts with the customers engaged in the offshore drilling industry for manufacturing and delivering new ships in 2016 and 2017, hence had to drop one such contract after many rounds of rigorous and renegotiate the terms of several other agreements.
“ After such negotiations and considering downturn in offshore drilling industry, future economic outlook of the offshore drilling industry, long term relationships with the customers, legal framework and wellbeing of the company, the management decided to enter in to agreements with feasible terms and conditions to both parties,” the company said in an earnings release yesterday. This not just led to a delay in releasing its December quarter results by the company to the Colombo bourse but also had to make a hefty Rs.1.17 billion provision from the profit adhering to prudent account practices and governance,
the company said. In the backdrop, the group’s December quarter turned a net loss of Rs.1.1 billion from a net profit of Rs.174.3 million a year ago. The group revenues were up by 1 percent yearon- year to Rs. 4.12 billion. Meanwhile, for the year ended December 31, 2015, the group incurred a net loss of Rs. 590.9 million from a net profit of Rs.290.9 million in 2014. The full year revenues were up by 5 percent to Rs.15.44 billion. However, the company said they could adapt to the current situation as there are confirmed ship building orders till 2017 and stable ship repair operations.
“As such, the company will continue with its normal business operations in both ship repair and ship building segments while looking forward to expand the volumes which will create positive results from 2016 onwards,” the statement added. Further the group is also free from any long term borrowings except a short term facilities amounting to Rs. 4.5 billion as at December 31. The group’s net asset value per share is Rs.141.50 while the share is trading at Rs.107. The company’s share in 2015 was trading between Rs.145 and Rs.165. As of the year end Onomichi Dockyard Company Limited held 51 percent stake in the company while the State controlled private sector pension fund, the Employees’ Provident Fund held 16.343 percent stake being the second largest shareholder.