Austal books record contract but US rejection hits shares

A contract for new Australian patrol boats has given shipbuilder Austal its biggest deal to date, but bad news from Alabama has sunk its shares.

Austal’s Guardian-class patrol boat. Picture: Supplied.

Shipbuilder Austal has been awarded a $324m federal government contract to construct a new fleet of patrol boats designed to bolster border security.

In the largest contract granted to the West Australian company in its 30-year history, Austal will construct six new Cape-class Patrol Boats for the Royal Australian Navy.

The additional boats will bring the Department of Defence’s fleet of Cape-class patrol vessels to 16 and will be constructed in Perth’s Henderson shipyard.

Austal chief executive David Singleton said the contract highlighted the government’s commitment in maintaining a shipbuilding industry within Australia.

“Since its introduction by the Australian Border Force (ABF) in 2013, the Cape-class has proven to be a high-performing, reliable and effective maritime asset, used for a wide variety of constabulary and naval missions, playing a critical role in Australia’s national security,” Mr Singleton said.

However investor enthusiasm for the shipbuilder’s listed stock was limited, with its shares plunging more than 20 per cent in early trade to a low of $2.56 each on Friday.

The contract with the Australian government coincided with a rejection from the US Navy for the construction of its proposed guided-missile frigates.

Austal proposed an enhanced version of its Littoral Combat Ship, which it is currently manufacturing for the US government.

Mr Singleton said the award of the contract to an alternate bidder was “disappointing”, with the company now looking at other construction options for its Alabama shipyard.

Minister of Defence, Senator Linda Reynolds said the Australian ships would be vital in maintaining the security of the country’s borders, while the navy waits for its larger fleet of Arafura Class Offshore Patrol vessels to be introduced into service.

“These vessels will not only enhance national security, but will provide important economic stimulus and employment continuity during the COVID-19 pandemic,” she said.

“The ability to build more of these vessels in Australia will deliver Australian industry content of more than 65 per cent, providing significant opportunities for Australian industry and Defence, as well as more than 1200 workers in the broader Australian supply chain.”

Mr Singleton said the project would ensure that 700 jobs are maintained throughout the supply chain.

Austal’s head of business development, Robert Jackson proposed that the government replace its older Armidale-class boats with the newer Cape-class series.

“This new contract will ensure Austal continues to engage the thousands of suppliers that are contributing to the success of the current Cape-class program, … and the multiple commercial ferry projects being delivered by Austal Australia,” Mr Jackson said.

Austal is also constructing a fleet of Guardian-class patrol boats for the federal government, which will be deployed as part of its Pacific patrol program.