Japan’s Onomichi Dockyard Company has announced plans to divest its 51% stake in Colombo Dockyard PLC, Sri Lanka’s largest shipbuilding and repair facility.
The company also intends to end a management agreement that has been in place for over 30 years.
This decision follows significant financial difficulties for Colombo Dockyard, which reported losses exceeding US$25 million in 2023.
Colombo Dockyard is currently in preliminary talks with several interested parties regarding potential investments in the strategically located facility, situated within the port precinct of Colombo. Historically, the shipyard has played a crucial role in servicing both military and civilian vessels.
However, the company’s financial troubles have raised concerns among investors and stakeholders. For the nine months ending September 2024, Colombo Dockyard reported a gross loss of LKR421.5 million (Sri Lankan rupees), marking a deterioration from previous figures.
Despite generating LKR18.84 billion in revenue during this period, operational costs surpassed revenues, resulting in substantial losses in key areas like shipbuilding.
Additionally, there are allegations of transfer pricing practices, which may have benefited the Japanese parent company at the expense of Colombo Dockyard’s profitability.
These practices could have siphoned value away from the local entity, exacerbating its financial issues and eroding shareholder confidence.
The company’s share price has seen a significant decline over the past year, reflecting waning investor trust due to ongoing operational inefficiencies.
As Onomichi Dockyard prepares to exit its investment, the future of Colombo Dockyard remains uncertain.
Stakeholders are urging immediate reforms to address financial mismanagement and restore investor confidence.
Without decisive action, Colombo Dockyard risks further financial decline and diminished influence in Sri Lanka’s maritime sector.
