Currency Effect

Mar 07, 2011 (LBO) – Colombo Dockyard has warned that a stronger rupee could hit profitability at the yard which last year saw profits dip owing to stiff competition and a downturn in its main tanker repair business. Ship repair, its main business. contributed only 30 percent of the total revenue volume of Sri Lanka’s listed shipbuilder, its chairman Akihiko Nakauchi told shareholders in the annual report.

The downturn was compensated for by growth in ship building revenue which contributed 68 percent of total revenue in 2010.

“Despite the fact that Colombo Dockyard contributes 1.5 percent of Sri Lanka’s export revenue, (because of the appreciation) of the Sri Lankan rupee we are faced with considerable challenges that have to be managed prudently,” Nakauchi said.

“Given that our business is based on 37 percent average value addition with all raw material, equipment and machinery sourced from abroad, as with all exporters, the appreciation of the Sri Lankan rupee could affect our bottom line significantly,” he told shareholders in the annual report.

Sri Lanka’s rupee has gradually appreciated against the US dollar and euro in recent months and monetary authorities have asked exporters to brace