Amid ship owners shifting survival mode, smaller ship yards filing for bankruptcy and the damp general global economic outlook, Colombo Dockyard PLC, a Sri Lankan listed ship building and repair firm saw its net profit plunging as much as 55 percent to Rs.337.4 million in 1Q’13 over the same quarter last year.
The earnings per share for the quarter declined to Rs.4.68 from Rs.10.37 in the corresponding quarter of the previous year.
“Orders are not coming well and the times are not good for the industry. State of pessimism is all around the sector as the world economy is still recovering from the recession,” said CEO, Mangala P. B. Yapa at a recently concluded Ports, Trade & Logistics conference. “But now we see some sort of a positivism,” he noted.
During the period under review, the increase in cost of sales by 15 percent Year-on-Year (YoY) to Rs.3.3 billion out paced the increase in revenue which notched up by 9 percent to Rs.4 billion resulting in a gross profit of Rs.744.7 million for the quarter.
“We see good business for ship building to that of ship repairing. Twenty percent of our turnover is now generated through ship building,” Yapa explained citing the changing dynamics in the industry.
Depressed charter rates have led to ship owners being cash strapped and unable to effect repairs.
“While ownership lagged behind, so did repairs, with most ship owners adopting a mindset of effecting repairs or purchases only if the need was extremely great”, the Chairman, Akihiko Nakauchi stated in the annual report.
Other incomes had the highest fall of 90 percent over the corresponding quarter to Rs.36.3 million while the administration expenses rose by 9.0 percent YoY to Rs.489.5 million.
“Now we have been forced to reduce costs and increase productivity in order to remain competitive,” Yapa added.
Colombo Dockyard’s business until recently has been concentrating largely around India and Singapore, particularly for ship building. However the company diversified in to niche vessel segment of Offshore Support Vessels (OSVs) and also ventured in to markets in Middle East and parts of Asia.
The final dividend of Rs 8.00 per share totaling Rs. 574.9 million for the financial year ended December 31, 2012 was paid on March 15, 2013.
Japan’s Onomichi Dockyard Company Limited, a 20-year old partner holds 51 percent stake of the 39-year old Colombo Dockyard PLC while another 14.8 is held by Employees Provident Fund as of March 31,2013.