Andrew Forest buys up Austal shares, eyes Aukus benefits

By Peter Roberts

A six month surge in the share price of Perth international shipbuilder Austal is likely attributed to a big new US Navy shipbuilding contract and the fact Fortescue boss Andrew Forrest has been quietly buying up shares and now owns a 15 percent stake in the company.

While other similar companies’ share prices have sagged this year, shares in Austal have risen since July 1 from $1.80 to a close yesterday at $2.61, a rise of 28.6 percent in six months.

Forrest has likely already made good money on his buy, but according to a report in Forbes.com, Forrest had a longer game – benefitting from Aukus’s potential positive impact on shipbuilding activity at both its Western Australian and Mobile, Alabama shipyards (pictured).

Austal, while having some quality issues and a run in with stock market regulators, is the darling of the US Navy.

Its entry into US shipbuilding has brought a breath of fresh air into an otherwise ossified – and ultimately slow moving and expensive – US naval shipbuilding sector.

The US Navy has given Austal, which builds two classes of aluminium multi-hulled vessels in Mobile, a number of breaks in recent years.

First the Department of Defense encouraged Austal to create a network of ship maintenance facilities, including at Cairns.

Then it paid half the capital cost of a US$100 million addition to its Mobile shipyard to enable it to build steel ships.

As for upside in Austal’s share price from the Aukus agreement – the company has already begun maintaining US naval ships in Australia and has been mooted as a location for the construction of vessel modules to be incorporated in US nuclear powered submarines.

On July 1 the company’s shares took off when Austal won a massive $4.3 billion contract to build up to 11 Offshore Patrol Cutters for the United States Coast Guard (USCG).

This added to a myriad of shipbuilding programmes for the United States Navy and United States Coast Guard, with construction continuing on the:

• Aluminium Independence-variant Littoral Combat Ships (LCS)
• Aluminium Spearhead-class Expeditionary Fast Transports (T-EPF)
• Steel hulled Navajo-class Towing, Salvage and Rescue (T-ATS) ships
• And an Auxiliary Floating Drydock Medium under contract for the United States Navy.

Clearly Austal is enmeshed with the US Navy and has a bright future there, even without Aukus.

But with US unable to speed up submarine building even for its own needs, the advent of Aukus raises some intriguing possibilities.

And the arrival of a savvy and bold businessman such as Andrew Forrest on the register can only be a positive for the company.

Plus a cornerstone Australian shareholder such as Forrest puts Austral out of reach of overseas predators.

Like many other Australian owned and controlled medium-sized defence contractors, a combination of low share prices and a low dollar has made Australian defence businesses vulnerable to overseas takeover.

And Australia, which has done so much to nurture the growth of Australian defence manufacturers, definitely does not want that to occur.

Editor’s note: this article has been edited to better reflect the impact of the US Navy coastguard cutter contract on Austal’s share price.

More reading:
AUSTAL WINS MORE US NAVY CONSTRUCTION CONTRACTS
AUSTAL COULD BUILD MODULES FOR US, AUSTRALIAN NUCLEAR SUBMARINES

Picture: Austal/Mobile, Alabama shipyard