Austal lauds certainty as revenue drops

Defence shipbuilder Austal believes a turnaround in its long-term order book will help it attract workers across from the battery minerals sector to its Henderson shipyard.

Including contracts and options, Austal’s global order book grew 84 per cent year on year to historical highs of $12.7 billion at the half year.

That excludes work that will be won under the federal government’s plan to reshape the Royal Australian Navy’s surface fleet announced this week, which Austal – as the government’s strategic shipbuilder of choice in Western Australia – is well placed to secure.

The company also had major wins in the US, where it was awarded a contract for three expeditionary medical ships worth $1.3 billion for the US Navy in December.

While the work book is filling, the company's revenue was down for the half year, from $775 million in the corresponding half to $717.7 million as a result of lower Australasian output. 

The result was predominantly booked off the company’s US segment, which accounted for 81 per cent of the company’s total revenue over the period.

Austal’s Australasian arm reported a loss before interest and tax of $6.4 million, with revenue shrinking as a result of lower shipyard use in the Philippines and Vietnam and minimal commercial ferry construction work.

Despite it, Austal marked a financial turnaround, from a $7.3 million loss in the first half of 2023 to a net profit after tax of $12 million for the first half of this financial year.

No dividend was returned, and the company's shares were trading 13 per cent lower at 9am this morning. 

Austal said recent developments in the defence sector gave it the opportunity to set itself up for the long term and highlighted the turnaround in defence procurement in the US and locally.

“The uncertainty we saw in Australasia has gone with the defence orders, and that trend has followed what we saw in the US over the past 18 months,” chief executive Paddy Gregg said.

“It’s given us an incredible order book and runway today.”

Austal expects its headcount at the Henderson shipyard to increase by up to 1,200 people over the next two years based on the surface fleet review and its position as a preferred supplier.

That comes after the company let go more than 1,000 people over the past four years at Henderson due to a lack of work certainty.

“For the first time ever we’ll be able to offer people careers, confident that they’ll be able to see out their working life at Austal,” Mr Gregg said.

He said he was confident Austal would be able to attract some of the workforce back to the shipyard with more certainty on the table.

“With some of the concerns around some of the minerals in WA, with lithium and nickel, you know, maybe that’s a good opportunity for us to pick up some people who want to come back into shipbuilding,” Mr Gregg said.

Initial defence work at Henderson is expected to begin almost immediately.

The first medium landing craft required under the surface fleet expansion are expected to be delivered in 2026, with hopes of the first heavy landing craft in service by 2028.

“There’s a real driver to get going: recruit the people, buy the materials, start building and deliver those vessels,” Mr Gregg said.

“We’re not talking about years away before the revenue increase comes. It’s very much a case of getting it to contract, and they would like to do that through the strategic shipbuilding agreement.”

Austal reaffirmed its 2024 financial year guidance on revenue growth of 8 per cent to 10 per cent year on year, with an underlying earning before interest and tax margin of 3-4 per cent.

Full year revenue is expected to be at the lower end of Austal’s guidance, which would place it at around $1.72 billion.

Austal shares were down 13 per cent this morning, to $1.94 at 9am.