Austal records $7.3m loss

Perth-based shipbuilder Austal has recorded a $7.3 million loss for the first half of 2023 and forecasts an even bigger blow for the full financial year.

Austal reported a net loss after tax of $7.3 million, down from its 2022 first-half profit of $45.1 million, due to delays with a US contract.

The company’s earnings before interest and tax (EBIT) were a loss of $2 million, a drop from its $71.1 million profit in the previous period.

Austal said the losses were due to the US towing, salvage and rescue ships (T-ATS) project’s loss provision.

On January 17, Austal announced it was progressing with a request for equitable adjustment (REA), and that it was reducing its earning guidance from about $100 million to $58 million for FY2023.

Austal said if the REAs were not resolved it would result in forecast loss of $US41.2 million for FY2023.

The delays with the T-ATS project began after Austal was awarded the $US198 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 $US385 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 the January statement, the shipbuilder announced it was seeking recovery of these amounts and that it would keep the market updated.

“The negative impact of provisioned losses provided on the T-ATS program to our half-year result is disappointing, as it masks what would otherwise have been a good result underpinned by robust EBIT margins,” chief executive Patrick Gregg said.

“Whilst management has submitted REAs and is making every effort to mitigate these losses, it is too early to form a view on whether and to what extent these losses can be reduced."

Mr Gregg said beyond the T-ATS program, the company was delivering shipbuilding and sustainment program across its US and Australasian operations.

“Our sustainment business is growing substantially, as Austal continues to demonstrate a growing and sustainable, large-scale and geographically diverse revenue base,” he said.

Meanwhile, revenue increased to $775 million, up from $722.2 million in the same period in 2022.

Austal’s EBIT guidance will remain unchanged at $58 million, and its order book stands at $6.9 billion.

The board declared an interim dividend of 4 cents per share, unfranked.

At market close, Austal shares were down 0.81 per cent to $1.84.