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Colombo Dockyard swings to profit as margins widen on lower sales

Colombo Dockyard PLC swung to a September-quarter profit as lower costs lifted margins, even as revenue declined and its shipbuilding business remained loss-making over the first half.

Profit attributable to shareholders was Rs. 164.9 million in the three months ended September 30, compared with a loss of Rs. 563.6 million a year earlier. Earnings per share reached 42 cents, against a restated loss of Rs. 2.44.

Revenue fell 3 percent to Rs. 7.49 billion, while cost of sales dropped 11.5 percent. That lifted gross profit by 53.4 percent to Rs. 1.56 billion and widened the gross margin to 20.8 percent from 13.2 percent.

Lower financing expenses provided a further boost. Net finance costs fell 40.7 percent to Rs. 294.5 million, while other income increased to Rs. 99.2 million from Rs. 9.4 million.

The improvement was partly absorbed by administrative expenses, which rose 5.1 percent to Rs. 1.09 billion. Other operating expenses totalled Rs. 76.1 million, compared with a credit of Rs. 6.8 million a year earlier.

The quarterly result took profit attributable to shareholders for the six months ended September to Rs. 251.2 million, reversing a loss of Rs. 1.37 billion. Half-year revenue fell 4.7 percent to Rs. 13.33 billion.

Ship repairs drove the first-half improvement. Revenue from the business rose 32.4 percent to Rs. 8.85 billion, generating gross profit of Rs. 3.28 billion, up from Rs. 1.87 billion.

Shipbuilding revenue fell 48.3 percent to Rs. 2.81 billion. Its gross loss narrowed to Rs. 838.4 million from Rs. 1.31 billion, leaving the business a drag on group earnings.

Heavy engineering also weakened. Revenue declined 16.2 percent to Rs. 1.34 billion, while gross profit dropped to Rs. 185.3 million from Rs. 680.8 million.

The balance sheet showed higher borrowings alongside a larger cash balance. Group interest-bearing debt, excluding overdrafts, rose to Rs. 19.11 billion at September-end from Rs. 14.63 billion in March.

Cash and cash equivalents increased to Rs. 17.27 billion from Rs. 7.35 billion. However, Rs. 15.46 billion was held in interest-earning deposits pledged as collateral for bank guarantees and other credit facilities, restricting its availability.

Net operating cash inflows more than doubled to Rs. 5.31 billion for the half-year. An Rs. 11.35 billion increase in trade and other payables supported that inflow, while higher receivables absorbed Rs. 5.77 billion.

At company level, quarterly profit was Rs. 130.8 million, compared with a loss of Rs. 635.3 million. Half-year profit reached Rs. 240.3 million, reversing a loss of Rs. 1.43 billion.

Colombo Dockyard changed its financial year-end to March 31 to align with its new parent, Mazagon Dock Shipbuilders Limited. The September filing therefore covers its second quarter and first half.

Despite the earnings recovery, accumulated group losses stood at Rs. 9.02 billion at September-end.