The Austal Ltd. (ASX: ASB) share price was trading 15% lower today following an announcement had lost a major tender it was hopeful of winning for the U.S. Navy.
For context, the broader Australian share market or S&P/ASX 200 (ASX: XJO) was trading at 5321.3, down 3.64%.
Who is Austal Ltd?
Austal is a shipbuilder and global defence contractor that designs and constructs advanced commercial and defence vessels. Austal is Australia’s largest defence exporter and the world’s largest aluminium shipbuilder. In its 30 years of operations, Austal has constructed more than 300 commercial and defence vessels.
Austal’s announcement
Austal today reported it has not been awarded the contract to construct Guided-Missile Frigates FFG(X) for the U.S. Navy.
The company was in a four-way competition to construct the FFG(X), proposing an enhanced version of the Littoral Combat Ship (LCS) it is currently manufacturing for the U.S. Navy.
“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, including EPF variants and unmanned vessels, which are the future of naval warfare,” Austal CEO David Singleton said.
“Importantly, Austal USA has excellent shipbuilding facilities and a professional workforce which builds highly capable and cost-effective ships.”
“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.”
It wasn’t all bad news for Austal though, in a separate announcement the company explained a separate contract it had been awarded.
Austal Australia has been awarded a $324 million contract to design and construct six evolved Cape-class Patrol Boats (CCPBs) for the Royal Australian Navy. This is the largest contract for an Australian vessel construction program ever awarded to Austal in the company’s 30-year history.
What Now?
Austal CEO Mr Singleton explained his disappointment in losing the U.S. Navy Contract. The company will now focus on existing construction programs and identifying new opportunities for its Alabama shipyard.
Shareholders are not taking this news too kindly, with a whopping 15.48% wiped from the company’s share price today alone. Hopefully, it is smoother sailing on the horizon for Austal.
Austal shares were last seen trading at $2.84, giving the company a market capitalisation more than $1 billion.
I personally wouldn’t be hopping on board and buying Austal shares today, I’d much prefer to buy the companies in the free report below.
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