Austal Limited (ASX:ASB) listed on the ASX in December 1998 at $1.00. ASB was founded in 1987 by boat builder John Rothwell. The business began with around 40 employees in Perth, Western Australia.
Today, the business is the world’s largest builder of aluminium ships, employs 2,452 people and in 2010 generated sales of $520M.
Divisions
Austal Ships is one of the world’s largest builders of high speed ferries. ASB’s facilities are located in Henderson in Western Australia. Current capacity caters for the simultaneous construction of two 100m vessels and four 40m vessels that includes shipbuilding and launching facilities for vessels greater than 120 metres in length. ASB is well placed to meet the needs of a global market. ASB operates under the brands of ASB, Oceanfast and Image.
Austal Defence has capabilities in the defence sector that range from patrol boats and theatre support vessels to coastal warships such as the Joint High Speed Vessel (JHSV) and the Littoral Combat Ship (LCS).
Ship building is a lumpy business that is notoriously cyclical by nature. ASB initially focused on the Asian ferry market with profitability in the early 1990’s being driven by strong demand from China and Hong Kong. As a result of the Asian financial crisis demand contracted, ASB looked for ways of diversifying its cyclical ferry building operations and acquired Oceanfast Ltd. This saw capacity added to produce smaller ferries and luxury motor yachts. Oceanfast was not immune to the downturn in the business cycle, this lead to varying profitability and a loss in 2003.
While designing and producing ferries and luxury vessels is still the focus, the business has slowly changed to producing ships for military use. ASB won its first contract with the US military in February 2001 following the establishment of a shipyard in Mobile, Alabama. This was indeed a turning point for ASB with an opportunity to access a market where relatively stable demand would come from a government committed to spending billions of dollars upgrading and modernising their military capabilities. The business is now focused on long term, predictable income streams offered by multiple vessel military constructions and multiple year maintenance contracts.
Management noted with the 2010 results that the operators within ASB’s traditional commercial ferry market were among those most affected by the global financial crisis, which resulted in the slowing of sales within Australia. At the first half results, management noted that the market is still soft, however buyer confidence is returning via good sales enquiries.
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