“YOU should be able to see Greg Norman’s yacht – no it’s already gone.”
“YOU should be able to see Greg Norman’s yacht – no it’s already gone.”
Was that a slight look of relief passing over John Rothwell’s face as he gazed out of the window of his office and across the choppy waters of Jervois Bay, realising that two and half year’s work on the famous golfer’s new motor yacht was over?
Mr Norman’s new plaything, Aussie Rules, had only moments before slipped its moorings and disappeared behind Woodman Point, marking a new milestone for Austal, Australia’s premier aluminium shipbuilder, and its luxury yacht subsidiary Oceanfast.
But it was not only the end of years of work building a ship of the highest quality; there had been some tough negotiations on the handover of the boat, estimated to be worth about $70 million.
Ever the diplomat, not to mention consummate salesman, Mr Rothwell described Australia’s best-known golfer as “astute” and then, after careful consideration, added “hard-nosed”. It was one good businessman recognising the qualities of another – in this case, a client who knows his name would be used by Austal to market its ships around the globe.
The result of the deal the pair struck is a massive amount of pub-licity for Austal, along with the expectation of a small loss on the Aussie Rules.
“Perhaps that was the price we had to pay for buying Oceanfast,” Mr Rothwell said.
Austal bought the neighbouring Oceanfast from the administrators about three years ago, inheriting a boat builder whose reputation, he believes, excelled its ability to deliver.
Historically, great designs had been let down, to some extent by quality issues and experimentation with the wrong materials.
Aussie Rules was a chance to deliver on the reputation, with a client that was prepared to live with the publicity.
In doing that, Mr Rothwell believes Oceanfast has stepped into the highest league of motor yacht building in the world with the completion of the boat, albeit at a cost for that development, joining a handful of yards with the capacity to build the same volume of prestige craft to those standards.
The move may have been costly but it has come during a lull in Austal’s most profitable area, the large fast ferry market.
With four other 50-metre plus luxury yachts in production at Henderson, the high net worth clients of the world are helping smooth the volatile earnings in this cyclical business – even though the average manufacturing time is two and half years, compared with six months for a large ferry.
“There is no doubt that the yard has been fast tracked on the world market because of that boat and Greg Norman,” Mr Rothwell said.
But it is not all about motor yachts.
In endeavouring to smooth the choppy cycle of commercial boat building, Austal is also working closely with the military in Australia and the US.
It has tendered for the Royal Australian Navy’s new Armidale class patrol boat contract to replace 15 Fremantle class boats.
In the US there are two big opportunities.
The first is using its large fast ferry as troop transports, a concept the US’s armed forces in Japan have already put into practice with a successful set of trials.
The company is also looking at combat applications for its ship design capability.
Austal’s US operation is part of a consortium including General Dynamic’s Bath Iron Works, Boeing and British Aerospace, which won a $US500,000 grant to conduct further research into specialist navy ships of the future.
It is possible up to 60 100m ships capable of high speed in shallow waters could be ordered.
“We won’t get all of that but we will get a chunk,” Mr Rothwell said.
He acknowledges that the military work is very important to Austal, due to the scale of the niche defence market, which extends beyond the US and Australia, mainly because of the weakness in the large fast ferry market that underpinned the company’s stock market listing.
Mr Rothwell said that market became flooded and may never reach the peak of a few years ago.
“There was a realisation that the market was limited,”he said.
“The [future large fast ferry] market will be smaller and Austal will be [a] bigger [player].”
To add insult to injury, Austal has had to slow production of one large ferry in its yard because of delays to the completion of port facilities in Rothchester, New York, where a client wants to ferry passengers and vehicles between Canada and the US.
The problems in the large ferry market and the cyclical nature of the business have weighed heavily on Austal’s share price, something recent sales announcements have failed to alter.
“I can’t change that,” Mr Rothwell said.
“I don’t spend a lot of time worrying about or thinking about my share price.
“Of course, I am disappointed when shareholders lose some money but I am the largest single shareholder in Austal, so when they lose some I lose a bit more.”
Meanwhile, he remains confident about the outlook and his ability to smooth Austal’s earnings.
Smaller vessels such as those made by another subsidiary, Image Marine, and Austal’s own small to medium ferry range continue to see sales “ticking over”, Mr Rothwell said, and the growing motor yacht business with the potential military work offer a more diverse base.
“The building blocks at Austal are better than they have ever been before,” Mr Rothwell said.
“It will always be cyclical but we are taking some of that out with a greater product range.”
p John Rothwell will tell the story of building the Austal business at a WA Business News breakfast function on March 13.
