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August 17, 2005

Austal's Rothwell upbeat as profits soar

Austal Chairman John RothwellAustal Limited this week reported an A$35.5 million (about US$ 27.3 million) net profit after tax and outside equity interests for the year ended June 30, 2005, up 76 percent from A$20.1 million last year. Revenue in FY05 amounted to A$321.3 million (about US$247 million) compared with $310.1 million last year.

Chairman John Rothwell said in an interview that the main improvement was in the company's Australian business which focused on the production of commercial vessels and patrol boats.

"Our U.S. operation continued to operate at a loss of A$1.4 million [about US$1 million] as it focused on expanding its capacity to undertake defense contracts for the U.S. Navy," said Rothwell. "The main increase in our capital expenditure was a result of the construction of our new production facilities in the U.S., which was partially funded by a grant from the State of Alabama and a loan from General Dynamics, our partner in the U.S. Navy's Littoral Combat Ships (LCS) project."

Rothwell noted that significant deliveries included the 127 m trimaran ferry Benchijigua Express to Fred. Olsen, S.A. for operation in the Canary Islands, a 50 m luxury tourism vessel True North and a 38 m research vessel. At year end, he noted, Austal had neared completion of an 85 m vehicle-passenger catamaran for Hellenic Seaways of Greece.

"In addition, we received new orders during the year for a 67 m vehicle-passenger ferry for Virtu Ferries of Malta, two 45 m catamarans for L'Express des Iles for operation in Guadeloupe and two orders for a 37m and a 58 m cruise vessel for private and charter use," Rothwell told corporatefile.com.au.

"In terms of defense vessels, we delivered the first of 12 Armidale Class Patrol Boats to the Royal Australian Navy and ten 37.5 m patrol boats to the Republic of Yemen. We also became the selected builder for six patrol boats for the New South Wales Water Police," he noted.

"At present, we have a tender in progress for large vehicle-passenger ferries for which we are well positioned," said Rothwell. "Given the current enquiry rate for our vessels, we expect to operate our Australian and U.S. businesses at full or near full capacity this financial year."

Austal's contract to construct two large ferries at its U.S. facility for Hawaii Superferry is conditional on finance and subject to the passing of a Hawaiian government bill and the upgrading of port facilities.

Rothwell noted that in an earlier briefing he had indicated that the Hawaii Superferry project would be coming to fruition in August or September 2005, when finance became unconditional.

"September remains likely on the basis of the information we now have.. " he said.

He also said that "Hawaii Superferry is preparing a request to the US Maritime Administration (MARAD) to change the engine supplier following advise from M.A.N. that it was unable to meet the required delivery date." The vessel will now have MTU main engines.

"In addition," noted Rothwell, "while Hawaii Superferry was successful in defeating an environmental challenge at the state level, the matter has now moved into the federal level. Nonetheless, Hawaii Superferry does not anticipate this will delay the closing of the project which is expected to take place in September. "

Looking forward, Rothwell says "our plans for the year are to confirm more commercial and defense orders for which we are well placed, build on our workforce and continue to improve our productivity. Shipbuilding is not a hugely capital intensive industry and we therefore anticipate being able to achieve growth without the need for substantial additional capital."

"We have a good potential order book in Australia," says Rothwell. "There are also a number of opportunities in the U.S. which we will further develop. The LCS project has been on the horizon for some time. We are confident that an initial construction contract will come to fruition in the current half of this financial year. Recent statements made by the U.S. Navy indicate that the project is moving forward and getting larger."

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