Business Times

Colombo Dockyard’s profit to stabilise

Colombo Dockyard PLC (CDPLC) will find it difficult to maintain their high profit levels unless they embark on a capital expenditure exercise to post better earnings in quarters to come, analysts said.
“In the next quarter they will maintain these profits, but there will not be any significant boost as profits have come to a certain maturity (stable level) where without a significant capital expenditure such investment in new equipment may help the company post larger earnings during the quarters to come,” Charuka Suchendra, Research Analyst Asha Phillip told the business Times.

He noted that during the last two years CDPLC, which enjoys a monopoly in being the country’s only ship builder, has seen a continuous growth in profits quarter by quarter during the past few years, but in the current economic climate they can post better profits with more capital expenditure or even expansions.

In the December quarter last year, the company’s net profit fell 24% to Rs 337 million while revenue from ship repair fell to Rs 1.56 billion in this quarter from Rs 1.78 billion a year ago for the same period with revenue from ship building slightly down. Jaliya Wijeratne, Director SMB Securities told the Business Times that as the company has a full order book for this year, the decreased revenue from ship repairs during the fourth quarter has offset the increased revenue from heavy engineering sector in the company to Rs 198.7 million against the Rs 5.7 million.

“This supported the company’s bottom-line despite ship building revenue been flat at Rs 2 billion. Going forward strong growth in all three segments (Ship repair, Ship building, heavy engineering) would contribute heavily towards CDPLC’s bottom-line,” he added. Another analyst said that this company has delivered in performance and earnings during the past few years, and was rated as the best performing share during last year.

“The company is also interested in exploration for offshore oil and gas businesses. It has also been building and repairing vessels for the offshore petroleum industry during the last three years. These are medium term opportunities which will see CDPLC better their profits,” he said.

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