Austal Upgrades FY2020 Earnings, Revenue Guidance
Local shipbuilder, Austal Limited, appears to have sailed out of the coronavirus pandemic relatively unscathed. This is because, unlike most firms, Austal has been greeted with a string of positive news since the start of the year. More recently, the firm has delivered yet another good news for investors. Specifically, its FY2020 revenue guidance has been increased to that of $2.0 billion while group EBIT is expected to come in above $125 million. This was relative to the previous revenue and earnings guidance of $1.9 billion and $110 million, respectively. More broadly speaking, while the revision does not represent an overwhelming change, it emerges at a time where most companies downgrade and narrow guidance.
The reasons influencing this decision are logical. Austal has proven to be a resilient business as the firm’s performance in April, and May have surpassed expectations. More importantly, the strong performance was not only witnessed in Australia. Rather, robust results were noted in the firm’s USA, Philippines and Vietnam operations. The firm has upheld its reputation of the first shipbuilder being listed on the Australia Stock Exchange. For more than three decades now, Austal has constructed more than three hundred vessels for defence and commercial operators across 100 countries.
More recently, Austal USA has announced that its 12th Independence Littoral Combat Ship (LCS), also known as LCS 24, has successfully completed acceptance trials over in the Gulf of Mexico. The LCS is a specific type of ship that is designed to provide access and along coasts and is suited to excel under warfighting conditions. Chief Executive, David Singleton viewed the milestone to be extremely significant as it represented Austal’s USA ability to deliver projects on time despite challenging macroeconomic conditions. More notably, the firm’s role was reinforced back at the peak of pandemic in March. Specifically, the US Navy and Department of Homeland Security have labelled Austal USA and its shipbuilding activities to be mission essential industries.
Closer to home, the company continues to maintain a friendly relationship with the government. At the start of May, the Morrison government has confirmed that it will be ordering six new patrol boats from Austal. The $324 million contract includes the construction and designing of six evolved Cape-class Patrol Boats (CCPBs) meant for the Royal Australian Navy. Specifically, the project will be undertaken at Austal’s Henderson shipyard in Western Australia. The six boats will also add to the existing fleet of two CCPB constructed in 2017, bringing the total count to that of 18 boats.
More broadly speaking, the firm’s relationship with the Commonwealth of Australia dates back to many decades ago. Austal has been appointed as the designated manufacturer of patrol boats since 1998 where 32 boats have been built for use by the Australian Border Force and Royal Australian Navy. Moving forward, Austal remains to be in an excellent position as its services are in high demand. This is evident as the US Navy as requested for an increase in its fleet size to that of 355, representing a 20 per cent room for growth.
By Caroline Wong
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