*Sailing through a storm
Sri Lankan shipbuilder Colombo Dockyard PLC (CDP) has a full order book which will keep the company busy until early 2011 but the global financial crisis could have a negative impact on overall performance.

"Our capacity is full till early 2011 so we have a healthy workload until early 2011 despite the global economic recession but there are several issues we will have to contend with," CDP Managing Director/CEO Mangala P. B. Yapa said.

"There is a strong possibility that we may face credit issues due to the global economic crisis where our clients will not be able to make payments on time while our suppliers too will face difficulties. We will have to be more flexible and prudent and manage our risks in order to minimize any loses," he told the Island Financial Review.

CDP’s revenue for the first nine months of 2008 increased to Rs. 7.3 billion from Rs. 5.7 billion for the same period in 2007. After tax profits for the period also saw an increase to about Rs. 1 billion compared with Rs. 734 million for the first nine months of 2007.

CDP’s global market share is not substantial and because of the global recession the company is likely to experience pressure on its prices.

"There is little that is known about the extent to which the global recession would impact on our economy but as far as Colombo Dockyard is concerned the trend may be pressure on pricing," Yapa said.

While countries such as India and China have devalued their currencies while experiencing growth, Sri Lanka’s relatively constant exchange rate is affecting the competitiveness of CDP.

"There is a negative impact when domestic costs remain high. The Nation Building Levy, labour costs and utility costs are unfortunate influences as well. We cannot compete on prices," Yapa said.

CDP sees it self as a company exporting professional services in repairing ships that not only call over to Colombo but are attracted from other regions to be repaired in Colombo’s dry docks, building specialized sea going vessels, of which 60 percent of its orders are from India, offshore engineering and heavy engineering.

CDP’s performance as an exporter had earned accolades and top honours by the National Chamber of Exporters in the chamber’s annual awards ceremonies.

Yapa said the company’s value addition is over 50 percent.

"There has to be more discussion about the global economic crisis; no one is talking about it. We all need to be aware that there is a recession. We need to have a balanced long term strategy in place to look into the needs of the entire economy.

"As far as exports are concerned, if we lose markets because we cannot compete, it will be very difficult to get them back," Yapa said.

However, for the silver lining, Yapa said CDP will focus on its offshore engineering and inland heavy engineering capabilities in a bid to expand its capacity. He said the company will venture into these areas and will focus on generating new business.

(See page 4 for more on our interview with Yapa: He highlights the need for consensus among stakeholders to develop the shipping industry in Sri Lanka and the opportunities a Comprehensive Economic Partnership Agreement with CEPA with India could bring which out weigh the obstacles.)