US drives strong Austal half year

Shipbuilder Austal reported a big jump in profit for the first half of the financial year, while it is still unsure of what its exact role will be in the upcoming $3 billion offshore patrol vessel build program.

The business reported a profit of $25.6 million for the six months to December, well up on $9.3 million in the previous corresponding period.

Revenue was $653 million, up about 0.5 per cent, although it was negatively affected by currency movements.

Austal’s best performing segment was its US operation, which accounted for $557 million of revenue.

Earnings before interest and taxes for the US operation was $36 million, down from $41 million in the previous period.

Production activity in the US was lower after a moderation in order activity, although the business reported a sizeable productivity improvement on littoral combat vessel construction.

The Australian segment reported revenue of $80.8 million, a big increase on $47 million reported in the six months to December 2016.

Ebit on the Australian segment was close to breakeven, however, with costs from head office and administration factoring into the mix.

The company is still in discussions for the allocation of work on the federal government’s offshore patrol vessel build, with chief executive David Singleton telling an investor and media briefing that the negotiation process had started recently and would go on for a few more months.

European shipbuilder Lurssen was selected as prime contractor for the project, with Austal and Henderson neighbour Civmec to share work on the building of 10 vessels from 2021.

“Austal was disappointed that it did not win the Royal Australian Navy’s offshore patrol vessel program outright but the government’s indication that it wishes Austal to be involved in the program has the potential to provide a backbone of work for the Henderson shipyard over the next 15 to 20 years,” the company said in a release today.

Shares in Austal were up 5.5 per cent to $1.87 at the time of writing.