Austal shares leap after government finalises shipbuilding deal
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More news: Shares in shipbuilder Austal gained in morning trade after the company announced that its newly created entity Austal Defence Australia would lead the build and delivery of 26 surface combatant vessels from Henderson, Western Australia for the federal government.
At 10:40am AEST, shares in Austal had lifted 6.3% to $6.82.
The federal government will hold a single 'sovereign share' in Austal Defence Australia, granting it information and veto rights as well as limited ability to give directions.
The company also announced an upgrade to its unaudited FY25 earnings before tax guidance from not less than $80 million to $100 million. This was partly due to the finalisation of an accounting treatment of a contract with General Dynamics Electric Boat announced in September 2024.
Government approves strategic shipbuilding agreement with Austal
The news: Shipbuilder Austal has finalised its strategic shipbuilding agreement with the federal government, which will see its subsidiary Austal Defence Australia become the prime contractor for the build and delivery of new surface combatants and Henderson, Western Australia.
The numbers: Under the agreement, Austal Defence Australia will lead the build and delivery of two pilot programs, totalling 26 vessels.
The context: Austal said the agreement will see the company deliver the government's key Tier 2 surface shipbuilding programs in WA, using a variety of contractors and suppliers. These include some of Austal's other shipbuilding entities.
The shipbuilding programs will generally be structured on a 'target cost incentive' basis which will provide reimbursement to Austal's allowable costs, plus a profit margin, which will be subject to 'painshare/gainshare' adjustments, the company said.
Austal said it anticipates Austal Defence Australia will generate "significant revenue" from the new agreement over the eight-year term of the proposed 'Landing Craft-Medium' pilot. The revenue earned by the other pilot, 'Landing Craft-Heavy', remains to be determined, though it would be a "substantially larger" project, it said.
