Austal shares take off on new Aussie contract win

Shares in shipbuilder Austal Ltd (ASX: ASB) are trading higher after the company announced it had been awarded a $4 billion contract with the Australian Government.

In a statement to the ASX on Friday morning the company said its Australian defence division had been awarded a contract to build eight landing craft heavy (LCH) vessels, under the Strategic Shipbuilding Agreement (SSA) with the Commonwealth of Australia.

Austal said the construction would take place at its Henderson shipyard in Western Australia and would start in 2026 and carry on until 2038.

A key Defence partner

Austal chief executive officer Paddy Gregg said the award of the contract reinforced the company's status as a trusted partner to the Australian Defence Force.

He went on to say:

This contract represents another significant investment in Australia's sovereign shipbuilding capability – and Austal Defence Australia is ready to deliver these highly capable vessels to support the ADF's operational requirements. Constructing the landing craft heavy vessels at Henderson will create and develop thousands of new, skilled jobs in Western Australia and provide further opportunities for the local defence industry supply chain. While Austal's US business has traditionally accounted for a large share of our defence order book in recent years, this contract reflects the growing strength and success of Austal's Australian operations — and Australian industry — within the national shipbuilding and sustainment enterprise. This LCH construction contract balances out the split and provides greater geographic diversity of earnings. It also provides earnings and employment stability for the next 12 years.

Racking up the wins

Austal said the contract was the second major contract award for the company under the SSA, following on from the award of the $1.029 billion landing craft medium design and build contract in December.

Austal Defence Australia executive general manager – strategic shipbuilding Gavin Stewart said the construction project would provide outstanding opportunities for people to work within the company and also for its supply chain partners.

The newly contracted vessels will be about 100m in length, 16m wide and have a crew of more than 200.

They can also carry either six Abrams tanks or nine Redback infantry fighting vehicles.

Austal also said that Austal USA was presently constructing up to 12 smaller Landing Craft Utility vessels for the US Navy at its Mobile, Alabama, US shipyard.

Austal shares were 5.4% higher at $6.29 on Friday morning.

The company was valued at $2.46 billion at the close of trade on Thursday.

The post Austal shares take off on new Aussie contract win appeared first on The Motley Fool Australia.

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