Austal reports EBIT loss but retains record $11.6b order book

Image credit: Austal, US Navy

Global shipbuilder Austal announced its FY2023 financial results, reporting a $4.8 million loss in Earnings Before Interest and Tax (EBIT), which is consistent with the previously advised earnings projection issued last month.

The ASX-listed company claimed that the US Towing, Salvage (T-ATS) program’s budgeted costs were the cause of the loss. The T-ATS loss has a total earnings impact of $171 million in FY2023.

Despite this EBIT loss, Austal has maintained a strong financial and operational foundation, supported by a healthy balance sheet, to deliver an order book worth up to $11.6 billion moving into FY2024.

“The provisioned T-ATS losses we announced last month has led to this disappointing financial result, which has detracted from a very bright outlook underpinned by a record order book in the USA and growing support business across both the USA and Australasia,” said Austal CEO Patrick Gregg. 

He emphasised Austal’s primary goal is to restart the T-ATS construction program while gradually growing the support business to create a diverse, sustainable, recurring, and earnings-accretive income stream. 

According to Gregg, the positive long-term forecast is supported by the award of significant steel programs in the United States during FY2023. 

The award of the Offshore Patrol Cutters (OPC) and the Auxiliary General Ocean Surveillance Ship T-AGOS 25 Class program (T-AGOS) brings Austal’s order book to a record $11.6 billion, including exercised and unexercised contract option agreements.

“Backed by the learnings we are taking from the T-ATS program, which was our first steel program in our newly commissioned US facility, in addition to the robust cost escalation protections for the recent major US steel project awards, we are well placed to secure and execute our record pipeline of work profitably,” he noted. 

Furthermore, Austal reported sales of $1.59 billion in FY2023, an 11 per cent increase over the $1.43 billion reported in FY2022. 

The rising support business drove the revenue increase, with support sector revenue increasing from $270.2 million to $367.3 million and segment EBIT increasing from $14.4 million to $23.7 million. 

Austal said it also benefited from a positive average AUD:USD exchange rate of $0.67.

The company’s Australasia sector recorded revenue of $366.4 million compared to $384.0 million in FY2022, representing a 4.6 per cent decrease from the previous similar quarter.

This income decrease was caused by the ongoing completion of significant commercial ferry programs in the Philippines and Vietnam. 

EBIT increased from $14.6 million in fiscal year 2022 to $15.8 million in fiscal year 2023. The enhanced EBIT margin resulted from the support division’s outstanding performance. 

Moreover, support revenue increased from $98.3 million to $144.1 million, while EBIT increased from $2.8 million to $9.1 million.

Gregg stated that in addition to the substantial pipeline of work now underway in the United States, the company is looking for latent growth prospects.

“There is still further shipbuilding capacity at our operations across both the US and particularly Australasia, and we are targeting a diverse range of programs,” Gregg noted.