Austal Limited (ASX: ASB)
Austal Limited (ASX: ASB) has positively placed itself as a top global shipbuilder and defence prime contractor, operating across the US, Australia, and the Asia Pacific. Its existence, mainly in the US naval industrial base, continues to grow, with the company playing a significant role in both naval shipbuilding and maintenance. Austal is also expanding its San Diego dry dock and is on track to achieve A$500 million in support revenue by FY27 with a focus on support services. The company Mobile shipyard in Alabama is increasingly viewed as a key site by the US Navy, and ongoing investments are enhancing both steel shipbuilding and submarine construction capabilities.
The company had a order book valued at A$14.2 billion as of 31 December 2024, including options, providing strong earnings visibility and long-term workload security. The business is pointing additional program wins, mostly through the proposed key Shipbuilding Agreement (SSA) with the Australian Government. This agreement, once concluded, is expected to support an important pipeline of Australian defence projects. The company diversified build programs and recent tender successes in the US market have supported its return to growth, enabling it to leverage industry momentum and favourable defence sector trends.
Austal is undertaking two significant infrastructure expansion projects in Mobile, Alabama. The Module Manufacture Facility 3 (MMF) is a US$450 million project supporting submarine module fabrication under a contract from General Dynamics Electric Boat. Separately, the Final Assembly 2 (FA2) project involves US$300 million in upgrades, including a new assembly building, waterfront improvements, and the installation of the Gulf Coast’s largest ship lift system. FA2 will support the construction and servicing of large steel-hulled vessels such as OPCs and T-AGOS ships. Construction began in FY24, through the facility expected to be operational by FY26 and fully completed in FY27.
The company plans to raise up to A$200 million through a non-underwritten Institutional Placement and up to A$20 million via a Share Purchase Plan, with the remainder funded through new debt facilities to fund the FA2 expansion. An Australian Government financing agency has issued a letter of support covering around 50% of the required funding for up to 10 years. An associated entity is conducting a A$50 million share sell-down, subject to the placement’s full subscription, with a six-month moratorium on further sales. The company confirms FY25 EBIT guidance of at least A$80 million, with upside potential pending final revenue recognition from the US$450 million submarine module contract.
(Source: Company's Report)
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