Austal Finalises Purchase, Expands Construction Strategy

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Austal finalises Purchase, Expands Construction Strategy


Austal Limited (ASX: ASB) has as of the 14th of September announced the completion of the purchase of Modern American Recycling and Repair Services of Alabama (MARRS) assets. The acquisition will bring more water-side land, buildings, and an existing dry dock which will boost production and service capabilities for ASB.

Steel ship construction and repair, as well as deepwater berthing capabilities will bolster the capabilities of Austal Limited now that the purchase is complete. The price of the acquisition came to be under 10 million and funded through stable cash reserves.

The cash reserves and profitability of Austal is supported by the developing relationship the shipbuilder has with the US Department of Defence. Earlier in the month on the 3rd of September, Austal delivered the 12th expeditionary fast transport (EFT) vessel, USNS Newport from the Alabama shipyard. This EFT brings the total delivered ships to the US Navy to 24 in under 10 years. As such, Austal is Australia’s biggest defence exporter and an industry leader in Australia, the US, Philippines, and Vietnam.

On the same day, AML3D executed a project to co-develop components for defence usage. One of the main projects undertaken is personnel lifting device to be installed on Austal navy vessels. The project aims to showcase the more efficient production process utilising WAM technology and the benefits of Design for Additive Manufacture.

Looking at the full-year results for ASB, it is clear that expansion is well supported by recent announcements and a profitable business model. 88 per cent of Group revenue now comes from defence projects, and this market has been protected from COVID-19 impacts due to the essential service classification. 397 million in cash have been recorded over this year and will enable a new phase of growth whilst increasing dividends for FY2021.

The growth rate year over year in revenue has nearly quadrupled over the last 6 years, achieving 28 per cent growth from FY19. The USA segment has a total reported revenue of 1,603.8 million dollars and earnings before interest or tax (EBIT) of 123 million dollars. Margins increased from 7.9 per cent to 8.1 per cent as efficiency increased in the creation of defence ships.

Meanwhile, the Australasian segment had reported revenue of 496.8 million dollars, which is a 26 per cent increase from FY19. EBIT improved from 11.7 million dollars in FY19 to 30.9 million dollars, signifying a 164 per cent increase. Expansion in the Philippines and Vietnam underline a united growth effort across both segments, with offshore facilities reaching a milestone in delivering commercial ferries in FY20,

A final unfranked dividend of 5 cents per share will be paid on Thursday the 22nd of October. The outlook for the company is relatively strong with limited impacts from COVID-19, and 4.3 billion dollars in the order book with the US and AU defence bodies to be delivered between FY21 and FY24.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at

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