Japan's Onomichi Dockyard Company has announced its intention to divest its 51% stake in Colombo Dockyard PLC, Sri Lanka's largest shipbuilding and repair facility.
In addition, it intends to terminate a management agreement that has been in effect for over 30 years.
This decision comes amid significant financial difficulties for Colombo Dockyard, which reported losses exceeding US$25 million in 2023.
Colombo Dockyard is currently in preliminary discussions with several interested parties regarding potential investments in the strategically positioned facility.
Located within the port precinct of Colombo, the shipyard has historically played a vital role in the maritime industry, servicing both military and civilian vessels.
However, the financial struggles faced by the shipyard 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, indicating a deterioration from previous figures.
Despite generating LKR18.84 billion in revenue during this period, operational costs exceeded revenues, resulting in substantial losses in key areas such as shipbuilding.
There are also allegations of transfer pricing practices that may benefit the Japanese parent company at the expense of Colombo Dockyard's profitability.
Such practices could siphon value away from the local entity, compounding its financial woes and undermining shareholder confidence.
The company's share price has significantly declined over the past year, reflecting waning investor trust amid ongoing operational inefficiencies.
As Onomichi Dockyard prepares to exit its investment in Colombo Dockyard, the future of the shipyard remains uncertain.
Stakeholders are calling for immediate reforms to address financial mismanagement and restore investor confidence.
Without decisive action, Colombo Dockyard risks further financial decline and a reduced role in Sri Lanka's maritime sector.
