Austal Dives into Loss
Australia’s largest shipbuilder Austal posted a full year loss of $84.28 million because a program to build war ships for the US Navy took longer than expected.
However, the result came in line with guidance issued last month over a change in estimate of the cost of completing the 11-ship littoral combat ship program.
Revenue fell 5.3% to $1.34 billion. The EBIT (earnings before interest and taxes) loss of $120.9 million, compared to a $85.3 million EBIT profit in 2015, was within new guidance issued last month.
The primary driver of Austal’s FY2016 loss was a change of estimate to complete construction of the Littoral Combat Ship program (LCS 6 – 26) in accordance with the US Naval Vessel Rules, as announced on 4 July 2016.
Austal Chief Executive Officer David Singleton said outlook for the US shipyard and the group remained positive despite the FY2016 financial adjustment on the LCS program.
The impact of the one-off downward adjustment to the LCS program has had on our earnings this year was disappointing, but Austal still has a strong order book and is generating strong cash flows from its efficient vessel construction,” Singleton said.
“Austal’s US$4 billion LCS program will be profitable across its remaining life because we now have a much clearer understanding of the design required and margins that will be generated from the remaining LCS vessels. Our US$1.6 billion Expeditionary Fast Transport program in the US has matured well, is delivering stable and predictable returns, and has good prospects for expansion.”
He added: “Austal’s Australia operations are in a period of transition as the shipyard is gearing up to construct a number of export and domestic defence contracts as well as commercial ferries following the conclusion of the initial eight-vessel Cape Class program early in FY2016.”
“Importantly, Austal continued to generate strong operational cash flow in the year, which has supported a further reduction in debt, ongoing dividends to shareholders, and enabled the business to end the year in a strong net cash position.”
Austal reiterates FY2017 guidance of US shipbuilding EBIT margin between 5-7 per cent, group EBIT of $45–55 million1, and ongoing positive operating cash flows.
This outlook supports the ongoing payment of dividends, investment in growth initiatives, and further reduction in Austal’s infrastructure- related debt in the year.
