Austal shows (again) why it should remain Australian controlled

By Peter Roberts

Shipbuilder Austal has again shown at its annual general meeting the folly of Australia's apparent unconcern should the company fall under foreign ownership.

In September Korea's Hanwha gave up on a takeover of Austal, a deal that was waved through by Defence Minister Richard Marles as of no concern to the government.

Remember, the government is supposedly backing domestic defence industry grow, yet is happy for our most successful indigenous company to be snapped up by foreigners.

Marles said at the time: “From the government’s perspective, we don’t have any concern about Hanwha moving in this direction.”

AGM presentations by Austal Chairman Richard Spencer and Chief Executive Officer Paddy Gregg painted a picture of a business increasingly involved US naval shipbuilding programmes including nuclear powered submarines, yet remarkably underappreciated at home by investors and government.

The Perth company has a $12.7 billion order book for 14 different naval vessel programmes, including a $670 million (US$450 million) contract from General Dynamics Electric Boat for nuclear submarine module construction. This is supported by a $220 million (US$152 million) contract from the U.S. Navy to invest in submarine construction infrastructure.

In the past year Austal was awarded 13 naval shipbuilding, seven in the US and six in Australia. Of course the company also manufactures fast aluminium passenger and vehicle ferries.

The company's global workforce is now 4,300 with the company planning to add and another 2,000 to cater for orders in hand.

Chairman Spencer, a former US Secretary of Navy, told the AGM that Austal did not take on risk associated with many capital expansions because it already had the ship construction contracts in place to justify them.

“Secondly, in some cases we are actually being paid to expand, with other groups funding the capital cost because of Austal’s importance in the US military industrial base.”

Spencer said the contract where General Dynamics would pay Austal for a submarine module manufacturing facility to be built at its shipyard in Mobile, Alabama was a testament to how Austal is viewed by the US naval shipbuilding industry.

He said: “Austal’s market capitalisation is $1 billion, yet here is one of the biggest defence
companies in America paying Austal the equivalent of two thirds of its market cap not to build the submarine modules, but to build the facility that will ultimately build the submarine modules.

“And while we don’t and won’t take it for granted, there is no doubt in my mind that this is
an enabler and hopefully precursor for further construction contracts in the US nuclear
submarine build.”

Spencer also highlighted the Strategic Shipbuilding Agreement Heads of Agreement signed with the Commonwealth late last year which made Austal the preferred shipbuilder for all Royal Australian Navy Tier 2 vessels, such as Landing Craft Medium and Heavy, General Purpose frigates and optionally crewed vessels.

Spencer said: “Strategic is an overused word, but in this case it is perfectly apt, because the federal government is taking a very strategic approach to its maritime defence requirements, and importantly for Austal and its shareholders, that strategic view extends to the vessel construction programme needed to meet those requirements.”

This is as gentle a rebuke as an Austal Chairman is ever likely to make as of a government strategy that would sell off the crown jewel of its indigenous defence sector.

In other news Austal delivered the eighth of ten Evolved Cape-class Patrol Boats (ECCPB’s, pictured)) under contract to the RAN.

The vessel is the eighth ECCPB built at Austal’s Henderson, Western Australia shipyard in four and half years. Austal is also building 24 Guardian class patrol boats.

It has been a remarkable few decades for the Perth company which has grown from a cray boat maker to a go-to naval shipbuilder.

All this came under the chairmanship of John Rothwell who retired in FY24.

CEO Gregg told the AGM: “While John continues to actively contribute to the Company as a Non Executive Director, it was his drive and determination as Chairman that set Austal up as the successful company that it is today.”

Further reading:
Korea’s Hanwha abandons takeover of Austal – media reports
Marles would let Austal fall into overseas hands – I would not
Austal awarded $670m contract for n-submarine module construction

Picture: Austal/Evolved Cape-class Patrol Boat