Austal shares plunge after shock loss warning
Shipbuilder Austal has warned it is in danger of sinking to a loss after a big blowout in costs associated with a US Navy contract.
Austal shares plunged almost 17 per cent to $2.14 in early trading before recovering some ground.
Austal chief executive Paddy Gregg with the USS Canberra in Sydney Harbour.
The revelation came on Wednesday just days after Austal and US and Australian navy top brass and politicians celebrated the commissioning of the USS Canberra in Sydney.
Austal, which had been in a trading halt since Monday, said it was struggling with issues around building towing, salvage and rescue ships (T-ATS) for the US Navy. The Andrew and Nicola Forrest-backed company said it could break even or record a full-year loss of $10 million. Its previous guidance indicated it would record $58 million in earnings.
The potential $68 million slide into the red coincides with Austal being circled by suitors led by US-based private equity funds.
Austal chief executive Paddy Gregg said it was “clearly a disappointing financial result” and blamed inflation and inaccurate assumptions within Austal for the earnings shock.
“The underlying issue is that the T-ATS award was received just prior to a period of unprecedented hyperinflation; some inaccurate assumptions were made regarding the efficiency of the new steel panel line in its first project and the project has also been subject to specification changes from the original award,” he said.
Mr Gregg said Austal clearly needed to make changes to reporting structures and processes to “identify and rectify these sorts of issues in a more timely manner”.
Austal has previously faced scrutiny and investigations around its conduct and market disclosures.
The earnings downgrade is a
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