Austal (ASX:ASB) shares slump after competitor awarded contract

• Austal (ASB) was down more than 23 per cent this morning after announcing its competitor was awarded a contract to build Guided-Missile Frigates for the U.S. Navy
• The shipbuilder was in a four-way competition to build the warships, but ultimately the contract did not fall their way
• Despite being disappointed they didn’t win the contract, Austal says it will continue to focus on existing programs
• However, Austal also announced today that it was awarded a $324 million contract to design and build six Cape-class Patrol Boats for the Royal Australian Navy
• The contract win marks the largest ever for Austal in its 30-year history
• The ships will be built at the company’s Henderson shipyard in Western Australia
• Construction of the vessels will begin immediately and deliveries are expected to begin in September 2021 and continue until mid-2023
• Austal has regained some ground, however, shares are still down 19.9 per cent and currently trading for $2.69 each

Austal (ASB) was down more than 23 per cent this morning after announcing its competitor was awarded a contract to build Guided-Missile Frigates for the U.S. Navy.

The shipbuilder was in a four-way competition to build the Guided-Missile Frigates FFG(X), claiming it would construct an enhanced version of the Littoral Combat Ship it is currently building for the U.S. Navy.

Despite being disappointed they didn’t win the contract, CEO David Singleton said Austal will continue to focus on existing programs.

“We have contracted orders for Littoral Combat Ships and Expeditionary Fast Transport vessels (EPF) that extend through to 2024 and a portfolio of opportunities we have been developing for some time,” David said.

“In addition, we had made the building of our support business a strategic focus, which will provide revenue and opportunities for many years to come,” he added.

However, Austal also announced today that it was awarded a $324 million contract to design and build six Cape-class Patrol Boats (CCPBs) for the Royal Australian Navy.

The contract win marks the largest ever for Austal in its 30-year history.

These six new vessels will be built at the company’s Henderson shipyard in Western Australia, and once built, they will add onto the Royal Australian Navy’s existing fleet of two CCPBs.

“With 10 Capes currently in operation with the ABF (Australian Border Force) and the Royal Australian Navy, it is a smart, logical step to build upon the existing fleet with additional vessels that will enhance the nation’s ability to protect and secure our maritime borders,” David commented.

“These new, evolved Capes add even greater national security at this critical time during the COVID-19 pandemic, by ensuring at least 700 jobs are maintained at Austal and supply chain opportunities continue for Australia’s shipbuilding industry,” he said.

Austal’s CCPB spans a length 58 metres and it is designed to perform border protection and maritime security tasks.

With these new boats, crew capacity has increased from 10 to 32.

Construction of the vessels will begin immediately and deliveries are expected to begin in September 2021 and continue successively until mid-2023.

Austal has regained some ground, however, shares are still down 19.9 per cent and trading for $2.69 each at 11:10 am AEST.