Henderson-based Austal has released its FY2018 results, citing a 154 per cent increase to its net profit after tax, driven by an exceptional performance across its US Navy shipbuilding programs and growth in the commercial ferry market, highlighting the growing success of the company.
Austal's marked growth has been driven across each of the company's individual sectors and wholly-owned subsidiaries. These results were matched by an excellent conversion of profit to cash, with positive operating cash flow of $65.6 million and total revenue of $1.39 billion, up 6 per cent from the FY2017 result of $1.31 billion.
Austal CEO, David Singleton said, "In its 30th year, Austal has delivered near-record profit, strong operating cash flow, and as a result is able to increase dividends to shareholders. Underpinning this result is the success story of Austal’s service and sustainment business, which continued to grow during the year as more and more Austal-built military vessels entered service in both the USA and Australia."
Austal saw earnings and cash flow driven by strong performance on US Navy shipbuilding programs, achieving a 8.5 per cent shipbuilding margin, up from 6.8 per cent in FY2017, while the company ended FY2018 in a net cash position of $33.9 million (FY2017: $19.3 million net cash).
Austal USA reported $1.16 billion in revenue, and 9.1 per cent EBIT growth over FY2017 as the company’s shipyard in Mobile, Alabama, achieved further efficiencies in the construction of two US Navy programs, the Littoral Combat Ship (LCS) and Expeditionary Fast Transport (EPF).
US shipbuilding margin grew to 8.5 per cent, exceeding the FY2018 guidance range of 6-8 per cent.
Additionally, Austal secured more than $420 million in commercial ferry contracts during FY2018, underpinning a major capacity expansion currently underway at the company’s shipbuilding facilities in Asia and WA. Austal also secured new defence vessel orders, which has led to an end of year order book of $3.0 billion.
"Austal USA delivered standout performance in the 2018 financial year, with even greater efficiencies achieved on our two major shipbuilding programs for the US Navy," Singleton said.
Austal USA: As Austal’s largest business unit, the US defence shipyard sustained the earnings turnaround that started in FY2017, reporting revenue of $1.16 billion (FY2017: $1.17 billion) and a segment EBIT of $83.0 million (FY2017: $76.1 million).
The key shipbuilding margin rose from 6.8 per cent in FY2017 to 8.5 per cent in FY2018, comfortably exceeding the FY2018 guidance range of 6-8 per cent. This result reflects a continuing improvement in shipbuilding performance, particularly around the LCS program.
Austal USA now has 10 ships on order across the two major defence vessel contracts for the US Navy, the US$5.9 billion LCS program and the US$2.0 billion EPF program. This includes a contract received in FY2018 to build LCS 30, the 15th LCS to be constructed by the company, awarded under a competitive tender process.
Austal Australia: Austal’s Australia segment reported revenue of $198.5 million (FY2017: $113.7 million), with an EBIT loss of $6.7 million (FY2017: $2.1 million EBIT loss).
Throughput at Austal’s Henderson shipyard increased significantly during the year, delivering revenue growth as Austal completed construction and design work on the Guardian Class Patrol Boat (GCPB) program for Pacific island nations, and large commercial ferries, as well as sustainment work on the Cape Class Patrol Boat (CCPB) support contract and Armidale Class remediation contract.
The earnings result reflected zero profit recognition for GCPB 1 until it is delivered in FY2019, no contribution from the CCPB sustainment contract (which was declared to be onerous in FY2017) and the low margin of the Mols ferry, which was originally intended to be built in the Philippines but for operational reasons was transferred to Australia.
Additionaly, this result was also impacted by writing off the substantial costs associated with bidding and preparing for the Australian Offshore Patrol Vessel (OPV) tender. Earnings are expected to improve in Australia as construction programs on contracted vessels mature. Henderson has made significant inroads in efficiency over the past two years, particularly with the Mols ferry, and this is extending across other programs. This, combined with throughput increases from existing vessel contracts, is expected to bring the facility back into profitability.
Austal Asia (Philippines, Vietnam and China): Austal’s Asia segment reported revenue of $57.9 million (FY2017: $33.8 million), with a segment EBIT loss of $1.6 million (FY2017: $0.1 million EBIT loss).
A large component ($1.2 million) of the segment loss reflected the expensing of mobilisation costs for the new shipyard operations in Vietnam. This new facility will provide additional capacity for Austal’s commercial shipbuilding program and will be available for operations within the next three months. The new facility is being built to Austal’s specification, but will be leased from a third party, providing flexibility to match future capacity needs.
Austal Philippines increased revenue to a record level during FY2018 as it began to ramp up to a significantly higher operating tempo. Revenue is expected to double in FY2019 as large commercial ferry projects enter construction. Austal is currently building a number of new facilities including a vessel construction hall, which will be the largest in the group outside of the US.
These new facilities will treble the maximum throughput capacity of the shipyard and enable the construction of Austal’s largest commercial vessels. The Philippines was, however, affected by disruption costs associated with the facility expansion, which impacted earnings.
The new facilities are due for completion in mid FY2019. Austal’s joint venture company in China, Aulong, established itself by completing its first vessel delivery, to an Austal design, in FY2018 and adding a further five vessels to its order book.
Austal is an Australian shipbuilder and global defence prime contractor that designs constructs and sustains some of the world’s most advanced commercial and defence vessels. Austal has designed, constructed and delivered more than 300 commercial and defence vessels for more than 100 operators in 54 countries worldwide.