Austal Secures Two More LCS Contracts From US Navy

  • Dec 17, 2018 AEDT
  • Team Kalkine
Austal Secures Two More LCS Contracts From US Navy

Austal Limited (ASX: ASB) wins another contract from the United States Department of Defence to build two more Littoral Combat Ships (LCS) for the US Navy fleet. The news sent the Austal shares to surge by 3.235% to trade at $1.915 on 17 December 2018 (12: 35 PM AEST).

With this, the total of LCS orders received by the company in the calendar year 2018 has gone up to four ships including LCS 32 and LCS 34 booked in September this year. The contract value has yet not been revealed due to competitive reasons, but congressional cost cap has been fixed to US$584 million per ship.

Austal CEO, David Singleton stated Austal has a track record of winning two Littoral Combat Ships contract every year from the past three consecutive financial years of the US Government. It outlines the production efficiency of the company-owned shipyard at Alabama USA.

This latest order includes the design and building of LCS 36 and LCS 38 which in turn strengthens the Austal’s forward order book. These two additional trimarans represent Austal’s eighteenth and nineteenth ships in the Independence Class. Currently, the company has a forward order book of addition ten ships that are scheduled to be delivered by 2025 in the continuous production program. So far Austal has delivered nine such ships while these ten ships are either under construction phase or waiting for construction to get commenced.

Mr. Singleton added that the orders from US Government demonstrate the Austal’s unique services in building aluminum trimaran and thereby playing a key role in United States Navy.

On the financial performance front, the company stated that significant growth in order book would support the future revenue growth of the company, thereby pushing earnings to higher levels. It is considered to be shareholders’ accretive as strong order book driven by the company’s ability to deliver and deploy ships around the world is expected to drive continued growth in earnings.

Moreover, in a separate release to ASX, the company announced that the Commonwealth of Australia has provided up to AU$80 million loan facility to support funding the acquisition of two Cape Class Patrol Boats. The facility has been made available through the Defence Export Facility to the Government of the Republic of Trinidad & Tobago (GoRTT). This financing package has been provided on the GoRTT previous’ request in which it indicated its intention to purchase these patrol boats from Austal but had asked for financial support from Export Finance and Insurance Corporation (EFIC).

Austal stated that it would take no financial liability of the loan is utilized. Further, it is expected that this program will turn into contract latest by the first quarter of 2019.

At the time of writing, Austal shares are trading at a price to earnings ratio of 16.420 x with a market capitalization of $652.95 million. Over the past one year, the stock has gone up by 9.44% however, since the past three months it is down by 2.88% as at 17 December 2018.


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