Austal builds sustainment business with new contracts

Perth based global shipbuilder, Austal (ASX: ASB) is building up a lucrative business of long term sustainment for the ships its builds.

The company’s latest contract, worth US$16.3 (Aud$23 million) is for post delivery sustainment of the Littoral Combat Ship (LCS) 20, the future USS Cincinnati.

This is on top of a recently announced US$21.1 million (Aud$29.7 million) contract for drydocking LCS 14, the USS Manchester.

Austal CEO David Singleton said Austal’s continued accumulation of sustainment contracts was the base for a considerable and long-term expansion to its service businesses.

“Building a significant service and support business has been one of Austal’s major business objectives,” he said.

“The award of this contract demonstrates our ability to build the services and support business into a material segment for the Company.”

Austal, the ASX’s only listed shipbuilder, is the country’s largest defence exporter with the frigate-sized LCS its most expensive product.

The company builds two classes of ships, the 127 metre long trimaran-hull LCS and the 103 metre twin hulled Expeditionary Fast Transport (EPF), for the US Navy at its yard in Mobile, Alabama.

Each contains considerable Australian Intellectual Property (IP) and numerous Australian sourced components and systems. Each needs to be maintained after delivery through a decades-long life.

Traditionally USN sustainment has taken place in San Diego. But Austal has an agreement with the Navy to perform this work in Mobile, reducing overall cost to the US taxpayer.

In the US, in addition to ship construction and sustainment, Austal has a contract to develop the LCS hull into a design which will be a contender for a major upcoming USN frigate contract.

Picture: Austal/Mobile, Alabama shipyard

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