Japan’s Onomichi Dockyard Company has informed the board of Colombo Dockyard of its plans to divest its 51 percent ownership stake in Sri Lanka’s international shipbuilding and repair company. The move comes as the company is marking its fiftieth anniversary while facing deepening financial challenges and competition in the international market.

Sri Lanka’s Colombo Dockyard Plc has announced that its Japanese majority shareholder, Onomichi Dockyard Company Limited, is exiting the company and stepping down from management, making way for a new strategic investor amid ongoing financial difficulties.

Sri Lanka highlights the location of the shipyard and its expanded capabilities as strategic advantages. In addition to being a large employer, the yard draws in critical export revenues for the country which has been plagued by a financial crisis. In 2023, Colombo Dockyard which supplies ships and undertakes projects for India, Norway, and France, earned approximately $110 million in export revenues, up 36 percent over 2022.

The current company was started in the 1970s by the government of Sri Lanka and began operations in 1974 focusing on harbor craft and smaller vessels. Today, it has the ability to handle vessels up to 125,000 dwt and provides both newbuilding and repair work. 

Colombo Dockyard highlights its expanded repair work as well as involvement in building a cable layer, hybrid bulkers, and work on VLGCs, dredgers, and offshore vessels. It has been undertaking projects for Europeans but faces regional competition as India looks to expand its shipbuilding industry.

The shipyard company has been under severe financial pressures with revenues so far in 2024 down by a third. Last year was the worst financial performance in the company’s history. It recorded a loss of nearly $38 million and has a total retained loss on its books currently of nearly $26 million. The company says it has informed its key creditors of Onomichi’s intent to divest its shares.

Onomichi which has been involved in shipbuilding since the 1940s, acquired its 51 percent take in the company in 1993 from the government of Sri Lanka. It was part of a privatization drive by the then prime minister and the deal also gave management control to Onomichi. As part of the decision to divest its shares, Onomichi’s board representation announced its resignation.

The board of Colombo Dockyard advises shareholders that it is in preliminary discussions for a new strategic partner. It reports unidentified parties have expressed an initial interest in investing in the company but that no terms have been set for the future. They look to continue the operation and have received assurances from Onomichi of its willingness to work with a new strategic buyer.