18/05/2018 - 14:45

Civmec profit up ahead of defence work

18/05/2018 - 14:45

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The Henderson contractor that outplayed local shipbuilder Austal for a share of work on the navy’s new offshore patrol vessels has doubled profit over the past nine months, but it remains unclear how much work it will gain from the $3.5 billion project.

Civmec profit up ahead of defence work
Civmec is adding another large assembly hall to its operations at Henderson. Photo: Attila Csaszar

The Henderson contractor that outplayed local shipbuilder Austal for a share of work on the navy’s new offshore patrol vessels has doubled profit over the past nine months, but it remains unclear how much work it will gain from the $3.5 billion project.

Civmec this week reported a net profit of $17.8 million for the nine months to March, more than double its profit in the prior corresponding period.

It has also more than doubled turnover over the same period, to $513 million.

(The Singapore-listed company reports in Singaporean dollars, which are trading close to parity with Australian dollars.)

Civmec also disclosed its order book grew to $832 million at March 31, an increase of $259 million since the end of December.

This includes Civmec’s contract to work on the Royal Australian Navy’s 12 offshore patrol vessels.

German company Luerssen, which is lead contractor on the project, has signed Civmec to supply steel for the 12 vessels, and to undertake the final assembly of 10 vessels at an $80 million workshop Civmec is building in Henderson.

These will be the first vessels built by Civmec, which bought the Forgacs shipyard in Newcastle in 2016.

It won the work over experienced shipbuilder Austal, which had teamed up with another German business, Fassmer, to bid for the project.

Luerssen said earlier this month it had conducted lengthy negotiations with Austal but was unable to generate a proposal that represented acceptable value for money.

Civmec could secure extra work as a result of Austal not being included in the project, but no details have been released.

Defence Industry Minister Christopher Pyne defended the outcome.

“The Turnbull government’s commitment to construct 10 offshore patrol vessels at Henderson, as part of the continuous shipbuilding program for minor war vessels in WA, remains unwavering,” Mr Pyne said.

“We will have Australian workers, in Australian shipyards, using Australian steel providing the capability navy needs.”

Austal, which generates most of its income from defence contracts in the US, has previously indicated the OPV contract was crucial to the long-term future of the Henderson yard.

However, chief executive David Singleton said last week the company’s current pipeline of work would enable it to sustain operations at Henderson.

The company said it had contracted $US400 million of new ferries in the past 18 months, with this work split between its shipyards at Henderson and at Cebu in the Philippines.

Austal also announced last week it would invest $US30 million ($40 million) in its commercial shipbuilding operations.

Most of the money ($24 million) will be spent at Cebu, to double capacity, while just $6 million will be spent at Henderson.

The Cebu upgrades will include a new assembly hall, which will allow the shipyard to assemble the largest commercial vessels on Austal’s order book and tender pipeline.

Austal also revealed the company recently commenced a small commercial shipyard in Vietnam.

The new facility, which is being leased by Austal, is located in the shipbuilding and marine support precinct to the south of Ho Chi Minh City.

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