Colombo Dockyard PLC has announced plans to seek potential investors to secure its long-term sustainability after suffering significant financial setbacks. The company, a key player in Sri Lanka’s shipbuilding and repair industry, faced severe challenges due to delays in vessel deliveries during the economic turmoil triggered by central bank rate cuts.
In a letter to the Colombo Stock Exchange, the firm stated that its Board of Directors is actively exploring investment opportunities to revitalize the business and ensure its future growth.
For the third quarter of 2024, Colombo Dockyard reported a sharp decline in revenue, falling from Rs. 7.9 billion in the same period of 2023 to Rs. 5.1 billion.
Despite the drop, net losses improved from Rs. 6.7 billion to Rs. 1.35 billion, reflecting better cost management. Over the nine months ending September 2024, the company recorded a net loss of Rs. 1.63 billion on reduced revenue of Rs. 18.8 billion, compared to Rs. 29.1 billion in 2023.
A SWOT analysis highlights the firm’s strategic location and diverse service offerings as strengths, but financial instability and liquidity issues remain pressing concerns. Colombo Dockyard relies heavily on global shipping demand, which has been volatile.
The company acknowledged the need for external funding, including foreign investment, to sustain operations and enhance its competitiveness. Potential investments could focus on technological upgrades and service expansion.
The company attributed part of its struggles to delays and cost overruns during the COVID-19 pandemic and subsequent currency crises, which hampered its ability to deliver cable-laying vessels.
A low bid price to enter the cable-laying market compounded its difficulties. Despite these setbacks, the firm’s ship repair business continues to generate cash, and progress is being made on building four hybrid bulk carriers for Misje Eco Bulk AS of Norway. Colombo Dockyard also secured an engineering project in the Maldives and plans to expand its ventures into higher-value markets.
To address liquidity issues, Colombo Dockyard has established credit lines with banks and is pursuing preferential funding options.
However, financial guarantees for large contracts remain critical, and the firm is under pressure to resolve its challenges promptly.
The company was placed on a Colombo Stock Exchange (CSE) watchlist after its auditors raised a going concern caution. If unresolved within 15 months, the firm risks trading suspension and eventual de-listing.
Colombo Dockyard’s Board of Directors has pledged to maintain transparency and provide updates on strategic investment efforts. The firm aims to implement remedial actions within 12 months, with deviations reported promptly. The search for investors underscores its commitment to overcoming current hurdles and driving future growth.
