Austal cuts earning guidance after delayed US contract

Perth-based shipbuilder and designer Austal has almost halved its earning guidance for the 2023 financial year after delays with a US contract.  

Austal’s shares dropped 9.41 per cent to $1.83 after announcing it was reducing its earning guidance from about $100 million to $58 million for the 2023 financial year.

The delays with the US Towing, Salvage and Rescue Ship project began after Austal was awarded the US$198 million contract for the construction of two vessels in 2021.

The contract provided options for up to three additional vessels, which would have brought the contract value to US$385 million.

Two of the additional options were utilised.

The deal also included a provision of US$7 million for onerous contracts, which was subsequently adjusted to US$11.6 million due to changes in specification, material quantities and cost inflation, according to Austal.

In a notice on the ASX, the company announced it was seeking recovery of these amounts and that it would keep the market updated.

“These requests of equitable adjustments remain outstanding and hence the extent of the forecast loss remains uncertain as it is substantially dependent on their determination,” Austal said.

“Recently, the company conducted a review of the forecasts for later vessels in the US Towing, Salvage and Rescue Ship program and applied the same forecasting methodology to those vessels.

“Using that methodology, the forecast loss arising from this program – assuming the REAs are not resolved during the 2023 financial year – is $US41.2 million.”

Austal said if the REAs were successfully resolved then the extent of the loss would be reduced.

“However, the Company does not know whether the REAs will be resolved prior to 30 June 2023 so has therefore determined to include the full extent of its forecast losses in its 2023 financial year earnings forecasts in accordance with relevant accounting standards,” Austal said.

“This means earnings guidance for FY2023 is reduced from approximately AU$100 million to approximately AU$58 million.”

Austal shares were down 9.41 per cent to $1.83 at market close.