By Dr. Sarath Obeysekera

Colombo Dockyard PLC (CDL), once hailed as a flagship of Sri Lanka’s industrial base, has recently secured contracts for highly specialised vessels — including cable laying ships for European clients and hybrid green bulk carriers. Yet despite this technically prestigious order book, the company under its long-standing Japanese management struggled to deliver consistent profits.

Several factors explain this paradox.

*Thin Margins on Niche Contracts

Specialized vessels such as cable layers are awarded through competitive global tenders. To secure work, CDL bid aggressively, which left razor-thin margins. Rising costs of steel, imported components and equipment further eroded profitability.

*Currency and Import Pressures

Although CDL earns much of its revenue in foreign currency, wages and overheads are rupee-denominated. The rapid depreciation of the Sri Lankan rupee and shortages of foreign exchange caused delays in paying overseas suppliers, generating penalties and cost overruns.

*High Fixed Costs and Low Yard Utilisation

A shipyard’s profitability depends on keeping its docks, cranes and workforce fully employed. CDL’s yard utilisation fluctuated, with only one or two large builds at a time. When repair volumes fell, fixed costs – labour, energy and maintenance – consumed much of the profit from ongoing projects.

*Limited Local Supply Chains

Shipbuilding-grade steel, marine engines and electronics still have to be imported. With Sri Lanka’s port congestion and import restrictions, this dependency increased lead times and exposure to global price volatility.

*Talent Retention Challenges

Shipbuilding demands highly skilled welders, engineers and fitters. Trained staff frequently left for higher-paying jobs in the Middle East and Asia. CDL had to spend heavily on training and incentives to retain its workforce.CDL has been forced to employ Indian skilled welders and fabricators ar high costs to meet delivery dates

*Missed Opportunities in Offshore and Defence

Despite its strategic location, CDL did not diversify strongly into the lucrative offshore energy or naval segments, unlike Indian or Singaporean competitors. Without government-backed export credit or policy support, CDL could not match the financing packages offered by larger Asian yards.Japanesel were always reluctant to diversify into  offshore engineering sector 

*Strategic Limitations of Japanese Management

Onomichi Dockyard provided technical assistance but maintained a conservative approach. CDL remained a small satellite yard rather than a fully empowered international builder. This strategic restraint limited its ability to scale up and earn higher returns.During the last few decades Japanese management hardy go5 involved in management of thE company 

*Conclusion

Colombo Dockyard’s predicament highlights a larger lesson for Sri Lanka’s industrial policy. Technical capacity alone does not guarantee profitability. Without scale, strong financing, and a diversified portfolio, even prestigious contracts can turn into low-margin business. As Sri Lanka considers new partnerships in Trincomalee and beyond, learning from CDL’s experience will be crucial to avoid repeating the same pitfalls.

Dr. Sarath Obeysekera is a former CEO of Colombo Dockyard and Chairman of the Advisory Board for Marine and Offshore Industry under the Export Development Board.