LCS program delays lead to loss at Austal

The following is text of a news release from Austal Ltd.:

(HENDERSON, Australia and MOBILE, Ala.) — Austal Ltd. has reported its FY 2016 financial results in line with guidance.

The primary driver of Austal’s FY 2016 loss was a change of estimate to complete construction of the littoral combat ship program (LCS 6-26) in accordance with the U.S. Naval Vessel Rules, as announced on July 4.

Austal Chief Executive Officer David Singleton said outlook for the U.S. shipyard and the group remained positive despite the FY 2016 financial adjustment on the LCS program.

"The impact of the one-off downward adjustment to the LCS program on our earnings this year was disappointing, but Austal still has a strong order book and is generating strong cash flows from its efficient vessel construction,” Singleton said. “Austal’s $4 billion (U.S.) LCS program will be profitable across its remaining life because we now have a much clearer understanding of the design required and margins that will be generated from the remaining LCS vessels. Our $1.6 billion expeditionary fast transport program in the U.S. has matured well, is delivering stable and predictable returns, and has good prospects for expansion.”

Austal USA reported revenue of $1.133 million (FY 2015: $1.119 million), with a segment EBIT loss of $90.5 million (FY 2015: $58.5 million EBIT profit). The FY 2016 EBIT loss was recognized following the completion of a comprehensive review of Austal’s $4 billion LCS block-buy contract, which was announced on July 4.

The USA operations progressed 17 vessel construction projects during the year. Austal delivered four vessels to the U.S. Navy in FY 2016 — two littoral combat ships (LCS 6 and 8) and two expeditionary fast transport (EPF) vessels (EPF 6 and 7). The order book was replenished when an option to fund LCS 26 was exercised by the U.S. Navy, representing Austal’s 11th LCS as prime contractor (Austal constructs the Independence variant, being the even-numbered vessels). Austal was also awarded contracts to procure long-lead items for an 11th and 12th EPFs from the U.S. Navy, providing confidence that Austal will be awarded contracts to construct the vessels.

By Professional Mariner Staff