Austal’s massive order book in year of more ups than downs

By Peter Roberts

The Chairman of Perth international shipbuilder John Rothwell has celebrated a year of massive ups and the occasional down in an upbeat address to the company’s annual general meeting.

Rothwell first and foremost celebrated the growth in Austal’s order book to $11.6 billion, if all contract option agreements are exercised.

Driven by massive orders for the US Navy and Coast Guard, this enviable backlog must make Austal one of Australia’s most successful ever exports – and Austal Australia’s latest underappreciated manufacturing business. (Why must this always be so?)

Apart from its home yard at Henderson in Perth, Austal builds passenger ferries in Vietnam and the Philippines, and operates a fast growing naval shipyard in Mobile, Alabama, which is being heaving supported by the US government.

Rothwell said: “$11.6 billion is a tremendous and unprecedented orderbook and would set Austal up as part of the US defence industrial landscape for the next decade and longer.

“There were two programmes which contributed to the substantial growth in our order book, the Offshore Patrol Cutter program for the US Coast Guard and the Ocean Surveillance vessels, better known as T-AGOS, for the US Navy.”

Austal is contracted to build up to 11 of the OPCs and up to seven T-AGOS vessels, which are being built at the company’s second success – its new steel vessel manufacturing facilities in Mobile.

Best known for its multi-hull aluminium vessels such as the Littoral Combat Ship USS Canberra recently commissioned in Sydney harbour (pictured), the decision to move into steel helped snare the OPC and T-AGOS vessels contracts.

With the new yard recently opened, the new orders show the strong support the US is giving a comparative shipbuilding newcomer compared to its ageing and often inefficient legacy shipbuilders.

Ropthwell said: “While our US heritage is building aluminium vessels, and we will continue to do so, steel vessel capability provides Austal with the ability to tender on a much larger array of vessels and therefore win more contracts.

“When the US Government offered to fund half of the US$100 million capital investment required to move into steel, we were confident the Government and Navy saw a future for Austal in steel, and to date that confidence has been well placed.”

The third business highlight has been the diversification of revenue, from two vessel types contracted in the US, Austal is contracted on 11 distinct vessel programs in the USA, as well as working in the areas of autonomy and construction of submarine modules.

Meanwhile the company’s support business, which hit a bump during Covid-19, has resumed its upwards growth trajectory with $227 million in revenue recorded in the USA and $144 million in Australia.

Of course there was a downside – the downgrading of the five vessel Towing, Salvage, and Rescue (T-ATS) Ships (T-ATS) vessel programme and its impact on our earnings and profit.

“Prior to our profit downgrade in June 2023, we had previously told shareholders that the programme had encountered changes in specification and general cost inflation pressures.

“However, as the build progressed, it became clear that the efficiency assumptions for the newly commissioned steel manufacturing line, such as labour hours and consequentially, recovery of overheads, did not meet forecasts and therefore required revision.”

Austal USA has submitted Requests for Equitable Adjustment (REAs) to seek recoveries for some of the additional costs incurred, however nothing is certain here.

However Austal has secured substantial cost-escalation protections for its other steel ship builds.

But you would have to say all in all, as Paul Keating might put it, Austal’s are a ‘beautiful set of numbers’.

Further reading:
Austal confirms FY23 loss on US steel shipbuilding
Austal built USS Canberra visits Sydney
Austal delivers US Navy’s largest autonomous ship
Austal wins new work in US submarine construction field

Picture: Austal/USS Canberra in Sydney harbour for its commissioning