Helped by LCS success, Austal returns to profitability

Sponsor Charlotte Riley breaks a bottle of champagne across the bow during the christening ceremony for the littoral combat ship USS Charleston (LCS 18) Sponsor Charlotte Riley breaks a bottle of champagne across the bow during the christening ceremony for the littoral combat ship USS Charleston (LCS 18) U.S. Navy photo by Mass Communication Specialist 1st Class Armando Gonzales

AUGUST 28, 2017 — Australian shipbuilder Austal Limited (ASX:ASB) today reported its results for the year ended June 2017, with underlying earnings exceeding guidance given at the start of the year. It said that this outcome was driven by a strong performance from the U.S. as the Littoral Combat Ship program continued to mature as expected.

Austal returned to profitability, with a net profit after tax of AUD 15.3 million (FY2016: AUD 84.2 million net loss after tax).

Austal USA contributed EBIT of AUD 76.1 million and a shipbuilding margin of 6.8 percent - at the upper end of the guidance range (5–7 percent), reflecting increased confidence in the Littoral Combat Ship program. Austal says this margin guidance will now be adjusted upwards from 6 to 8 percent. Earnings from Australia and the company's Philippines shipyards were described as "subdued as anticipated," with construction volume in both yards limited during the period. Both yards are expected to increase throughout from now as the current order book matures into profitable activity and increased volume and near term potential orders are won.

Austal Chief Executive Officer David Singleton said the result from Austal's U.S shipyard was testament to the advanced shipbuilding techniques Austal had developed.

"Our ability to efficiently deliver two separate military programs to the world's largest and most sophisticated Navy demonstrates the expertise that this Australian shipbuilder has as a global prime contractor," Mr. Singleton said. "Our advanced modular manufacturing facility in the U.S. has allowed us to deliver significant efficiency gains on the multi-billion dollar Littoral Combat Ship program."

"Our confidence in the costs to complete of the LCS program continues to increase. The recent award of LCS 28 will drive additional profit growth because it was bid and won using a revised construction cost base which can assure a normal level of profit for a program of this type."

ANOTHER LCS CHRISTENING IN MOBILE

Austal USA hosted the christening of the eighteenth LCS, the future USS Charleston, with a ceremony at Mobile, AL shipyard on August 26.

Charleston (LCS 18) is the seventh of 12 LCS vessels Austal has under contract with the U.S. Navy. The total order value is over $3.5 billion.

"Today marks another major milestone with the christening of this remarkable war ship," said Austal USA President Craig Perciavalle. "Our talented shipbuilding team is honored to provide our Navy with an extraordinarily capable vessel that will honor the great city of Charleston as she operates around the world."

"I am honored to be here as we christen the newest LCS, the future USS Charleston," said Secretary of the Navy Richard V. Spencer,. "Charleston, like the other ships in the LCS program, is going to be highly maneuverable, able to operate where other ships cannot, and will project power through forward presence. The ship and her crew will serve our nation for decades to come, but let us not forget our industrial force whose service makes this great ship possible. I am grateful for the men and women of Austal for their dedication, and to the citizens of Mobile for their support, as we continue to make our Navy stronger."

Charlotte Riley, the wife of 10-term, former Mayor of Charleston Joe Riley, served as the ship's sponsor, breaking the traditional bottle of champagne across the bow to formally christen the ship.

The LCS program is at full rate production delivering two ships a year and is continuing its momentum at Austal USA with seven ships currently under construction. Omaha (LCS 12) will be delivered in the coming weeks; Manchester (LCS 14) is preparing for trials and Tulsa (LCS 16) will begin trials at the end of the year. Final assembly is well underway on Cincinnati (LCS 20). Modules for Kansas City (LCS 22) and Oakland (LCS 24) are under construction in Austal's module manufacturing facility.

Austal USA has also delivered eight Spearhead-class EPFs that are serving as an affordable solution to fulfilling the Military Sealift Command's requirements worldwide. Three additional EPFs are under construction at the Mobile shipyard.

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