Colombo Dockyard profit returned in the second quarter as stronger ship repairs, lower costs and reduced finance expenses reversed losses.
Colombo Dockyard profit returned strongly in the second quarter as booming ship repair activity and lower financing expenses reversed the heavy loss recorded a year earlier.
Colombo Dockyard PLC reported a group net profit of Rs.80.2 million for the three months ended June.
The company had recorded a loss of Rs.813.4 million during the corresponding quarter last year.
The figures appeared in interim financial statements submitted to the Colombo Stock Exchange.
The recovery came despite a decline in overall revenue. Group revenue fell 6.8 percent to Rs.5.84 billion during the quarter.
However, tighter cost controls produced a significant improvement in profitability.
Cost of sales declined 21.8 percent to Rs.4.63 billion. As a result, gross profit climbed to Rs.1.21 billion from Rs.345.4 million a year earlier.
The company’s gross profit margin consequently rose to 20.7 percent from just 5.5 percent.
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Colombo Dockyard Profit Driven by Ship Repairs
Ship repair operations emerged as the strongest contributor to the turnaround.
Revenue from the segment increased 48.4 percent to Rs.3.95 billion.
Meanwhile, gross profit from ship repairs more than doubled to Rs.1.46 billion.
That performance helped offset continuing weakness across Colombo Dockyard’s other major business divisions.
Shipbuilding remained the company’s weakest segment during the quarter.
Revenue from shipbuilding fell 61.6 percent to Rs.1.05 billion.
The division continued to post a loss at gross profit level. However, the deficit narrowed considerably to Rs.378.8 million from Rs.899.6 million last year.
Heavy engineering also remained under pressure.
Revenue from the segment declined 11.7 percent to Rs.703.6 million.
Its segment profit fell sharply to Rs.30.4 million from Rs.480.7 million, reflecting weaker project activity and pressure on margins.
The group also benefited from a substantial reduction in finance expenses.
Net finance costs fell 63.8 percent to Rs.188.2 million, easing a major burden on earnings.
However, administrative expenses increased 18.2 percent to Rs.1.03 billion.
Other income also declined 57.7 percent to Rs.108.5 million during the quarter.
Profit attributable to the company’s owners reached Rs.86.3 million.
That compared with a loss of Rs.808.4 million during the same period last year.
Earnings per share improved to 22 cents from a restated loss of Rs.3.51.
Cash Flow and Borrowings Remain Key Concerns
Despite the return to profitability, Colombo Dockyard continued to face pressure from cash flow and debt.
The group recorded a net operating cash outflow of Rs.678.1 million during the quarter.
A Rs.3.43 billion increase in trade and other receivables contributed heavily to that outflow.
Trade and other payables also increased by Rs.2.35 billion.
At the end of June, Colombo Dockyard held Rs.8.48 billion in cash and cash equivalents.
Interest-bearing borrowings stood at Rs.14.79 billion, while bank overdrafts reached Rs.1.70 billion.
The figures show that the company continues to carry substantial financial obligations despite its improved quarterly performance.
Total equity rose sharply to Rs.15.59 billion from Rs.4.07 billion a year earlier.
However, accumulated retained losses remained high at Rs.9.23 billion.
Colombo Dockyard recently changed its financial year-end from December to March.
The company made the change to align its financial reporting period with that of its parent company, Mazagon Dock Shipbuilders Limited.
The latest financial results remain unaudited.
Nevertheless, the return of Colombo Dockyard profit marks a significant reversal from last year’s heavy loss.
Sustaining that recovery will depend on continued strength in ship repairs, tighter cost control and the company’s ability to improve cash generation while managing its borrowings.
