Austal heads for rough waters in naval market

By Peter Roberts

Perth global shipbuilder Austal has received a blow with the US Navy selecting another group to design its next-generation frigates.

Austal had been funded to be in competition with three others to build the frigates which will be commissioned in large numbers to help boost USN ship numbers.

Austal had further developed its aluminium trimaran hull which is the basis of the company’s Littoral Combat Ship (LCS) being constructed at the company’s Alabama shipyard.

Austal also makes a catamaran transport and logistics craft for the Navy.

The Navy instead selected Fincantieri’s European multi-purpose frigate, or FREMM design, which features a conventional steel monohull.

Austal’s aluminium offering was always a long shot, given that the LCS has not pleased conservative segments of the USN which favour steel designs.

The LCS concept also took a long time to work up to a level where it was a real contributor to the US naval fleet, with versions now operation in South-East Asian waters.

While it is always open for the USN to select a second competing design for parallel construction, as it did with the LCS, Austal must be bitterly disappointed at its missing out on the contract.

The company has made huge efforts in recent years to diversify its business and prepare for the possibility of losing the frigate deal.

Services including maintenance have becime a bigger proportion of the company’s earings, and the capabilities of its Philippines shipyard in particular have been vastly improved.

Austal has other less developed yards in Vietnam and China.

In Australia the company is benefiting from the low Aussie dollar and wins in building Guardian class patrol boars for Pacific Island nations and, most recently, Arafura class patrol boats for Australia.

Both patrol boat designs are manufactured in Perth and have steel hulls, a clear case where Commonwealth defence purcases have helped increase local company capabilities.

Austal has done its best to position itself to sail on past the contract loss.

However 77 per cent of the company’s profits come from the US operation.

In February it reported an EBIT jump of 48 per cent to $59.9 million for the first half on turnover up 22 per cent to $1.039 billion, a record for the company.

With an order book valued at more than $4.3 billion, and USN ships still to complete on orders that will take it to 2024, it will likely survive.

But prosperity is not guaranteed for anyone.

Picture: Austal/USS Coronado (rear) and USNS Millinocket

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