Stand by for some bad news early next week from Perth-based shipbuilder Austal which yesterday put its shares in a trading halt over the performance of its troubled US US warship building operations.
Austal said the halt had been requested in order to complete a review of the situation, and that it would update the market on Monday.
Companies do not suspend their shares for two trading days (and close to a weekend to give them two extra days) for good news on trading conditions.It is usually something to do with a problem which is impacting revenues and profits.
Coming so close to the end of the financial year, it seems the news will not be good for Austal shareholders
Last December Austal’s share price plunged when it told the market that difficulties with its littoral combat ship program would hit the bottom line.
Austal builds the vessels for the US Navy under a 10-ship $US3.5 billion program.Delays and margin pressure on the first of those ships had had a knock-on effect with the next two vessels.
Austal’s shares last traded at $1.21 on Wednesday.
The December update saw the shares slide 27.1% to a low of 98 cents and they fell a further16% in January of this year when Austal revealed a new CEO. The shares rebounded when it produced reasonable interim figures in February.
Austal delivered two ships to the US government last month on June 24 and June 27, but surprised with yesterday’s announcement.
In the request for a trading halt yesterday, the company said it will “enable Austal to complete a review of its US performance and following completion of that review, make an announcement updating guidance on the Company’s performance for 2016;
"Austal will update the market via an investor teleconference at 9.00am (Eastern Standard time) on Monday 4 July 2016 – details of this teleconference will be provided as part of an announcement prior to the commencement of trade on that day.”
On December 10 last year Austal told the ASX in a statement (that saw the shares slump 27% on the day) in part that one of its uS contracts was having trouble.
"As detailed in its FY2015 results, Austal was experiencing schedule and margin pressure on Littoral Combat Ship (LCS) 6, Austal’s first as the prime contractor. Austal is building multiple LCS in parallel, with the impact of cost and schedule performance on LCS 6 continuing to impact LCS 8 and LCS 10 – both of which are in an advanced state of completion,” Austal said.
"Austal’s ability to apply lessons learnt and productivity enhancements from LCS 6 to vessels in advanced construction, namely LCS 8 and LCS 10, has been more limited than anticipated. As a result, FY2016 earnings from Austal’s US shipyard are expected to be lower than in FY2015, with US shipbuilding EBIT margin expected to be in the range of 4.5% to 6.5%.
"Austal’s other major vessel program at its US shipyard, the Expeditionary Fast Transport program (formerly called the Joint High Speed Vessel), has reached construction program maturity, with shipbuilding margin stable,” Austal added.
