The Austal Ltd (ASX: ASB) share price is up around 9% after reporting an exciting US contract.
Austral calls itself Australia’s global shipbuilder and defence prime contractor involved in creating advanced commercial and defence vessels. It has shipyards in Australia, the USA, the Philippines and Vietnam, with service centres worldwide, including the Middle East.
US contract win
The ASX share announced that Austal USA has been awarded a US$450 million contract by General Dynamics Electric Boat. This contract will allow Austal USA to expand its production capacity at its US shipyard to support the US navy submarine industrial base.
The awarded contract will enable Austal USA to improve its existing infrastructure by designing, constructing and outfitting a new module fabrication and outfitting facility at its mobile shipyard to support the US Navy goal of delivering one Columbia-class and two Virginia-class submarines each year.
Construction of the new building will start within the next few months and be complete in 2026.
When fully operational, the building will support approximately 1,000 jobs and provide the capability to manufacture, outfit and transport submarine components.
Austal’s management believes this contract highlights the growing partnership with General Dynamic Electric Boat and demonstrates its confidence in Austal USA as a “valuable industry partner” for the two important US Navy submarine programs.
Management comments
Austal CEO Paddy Gregg said:
General Dynamics Electric Boat has recognised that Austal USA is a solid partner to deliver high-quality components for Virginia- and Columbia-class submarines. This growing partnership demonstrates confidence in Austal USA’s commitment to meet the needs of the U.S. maritime industrial base and support the most critical needs of the U.S. Navy.
Final thoughts on the Austal share price
Investors are clearly excited by this news, and it shows how integrated Austal is becoming in the US navy sector.
The business has already risen in response to the news, so I’m not sure how much further short-term gains there may be, however it bodes well for the company’s long-term ongoing operations.
There are other ASX growth shares that I’d buy rather buy which aren’t reliant on US government spending for earnings.
