Japan’s Onomichi Dockyard Company has announced its decision to divest its 51% ownership stake in Colombo Dockyard, Sri Lanka’s leading international shipbuilding and repair company. The decision coincides with the company’s fiftieth anniversary and comes against the backdrop of intensifying financial difficulties and growing competition in the global maritime industry.
Colombo Dockyard is strategically significant for Sri Lanka, both as a major employer and a critical source of export revenue for a country grappling with an ongoing financial crisis. The shipyard’s prime location and its expanded capabilities are seen as key advantages. In 2023, the company generated approximately $110 million in export revenues, marking a 36% increase compared to 2022. Its clientele includes prominent nations such as India, Norway, and France.
Founded in the 1970s by the Sri Lankan government, Colombo Dockyard commenced operations in 1974, initially focusing on harbor craft and smaller vessels. Over the years, it has evolved to handle vessels up to 125,000 deadweight tons (dwt), offering both newbuild and repair services.
The shipyard has recently emphasized its expanded repair services and its involvement in specialized projects, including the construction of a cable-laying vessel, hybrid bulk carriers, and work on Very Large Gas Carriers (VLGCs), dredgers, and offshore vessels. Despite these advancements, Colombo Dockyard faces mounting regional competition, particularly as India strengthens its shipbuilding sector.
The company’s financial performance has been under severe strain. In 2024, revenues have plummeted by one-third, following what was the worst financial year in its history in 2023, when it reported a loss of nearly $38 million. Currently, Colombo Dockyard has a total retained loss of nearly $26 million on its books. The company has notified its primary creditors of Onomichi Dockyard’s intent to sell its shares.
Onomichi Dockyard, a veteran in the shipbuilding industry since the 1940s, acquired its majority stake in Colombo Dockyard in 1993 through a privatization initiative led by the Sri Lankan government. The deal also granted management control to the Japanese company. As part of the divestment process, Onomichi’s board representatives at Colombo Dockyard have tendered their resignations.
The board of Colombo Dockyard has assured shareholders that preliminary discussions are underway to identify a new strategic partner. While potential investors have expressed initial interest, no concrete terms have yet been established. The board also noted that Onomichi has pledged its cooperation in facilitating the transition to a new strategic buyer, ensuring continued operations at the shipyard.
