Austal shares lift after securing contract adjustment with US Navy
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The news: Ship building company Austal saw its shares jump in morning trade after reaching an agreement with the US Navy over its Towing, Salvage and Rescue Ship (T-ATS) program, currently under construction in Alabama.
The numbers: Austal shares were up 2.8% to $7.96 at 11:10am AEST, having surged 175% over the last 12 months.
The context: Austal said the contract adjustment will result in "only limited alternation on the overall original contract value", which totalled USD380 million ($576 million) for the construction of five vessels.
The company has been in discussions with the US Navy to seek an equitable adjustment for the additional costs incurred in the T-ATS program, and agreed to temporarily stop work on two of the five vessels under construction.
The resolution announced this morning will pause construction of those two vessels permanently, with the construction contract being reduced to three vessels.
The T-ATS program was awarded in 2021 and was Austal's first steel vessel construction contract for the US Navy. The program has experienced a number of challenges, primarily due to late receipt of technical data and design discrepancies, the company said. The contract was consequently treated as onerous by Austal in the company's financial accounts.
The source: ASX
