Austal shifting away from luxury yachts

WHANGAREI, New Zealand – Boat manufacturer Austal Limited today reported a net profit after tax and outside equity interests of NZ$20.1 million for the financial year ended June 30, the company said in a release.

The results were due to the company’s shift from building luxury yachts to patrol boats, Austal said. The company has consistently performed well in commercial vessels and patrol boats, which now constitute the greater part of its revenue. Contracts already in hand guarantee work through to 2007, which contributes to a positive outlook overall, according to the company.

Austal’s managing director, Bob McKinnon, said continued improvement in productivity in the commercial and defense contracts, particularly in the U.S. operation, and lower losses from the luxury yacht construction activities contributed to the turnaround from last year.

“The U.S. operation’s financial results have improved markedly, with the loss being reduced from $12.9 million in 2003 to $1.0 million in 2004,” McKinnon said. “All outstanding motor-yacht contracts have been completed and the facilities previously used for their construction are currently being utilized for the production of commercial and defense vessels.”

The decline in the luxury motor yacht activities was replaced by increased production of patrol boats. This resulted in total revenue of $310.1 million, a slight increase on the previous year.

Austal said that subject to operating requirements and market conditions, the company is proposing to buy back up to 5 percent of its issued share capital over the next 12 months.

Outlook

Contracts on hand at June 30 amounted to $460 million to be completed across the 2005, 2006 and 2007 financial years. Approximately 70 percent of this is derived from defense-related projects and the remainder from commercial vessel construction, Austal said.

The company said significant developments during the year that contributed to its positive outlook included:

– Securing the contract to build 12 new 56-meter patrol boats for the Royal Australian Navy. Construction commenced on schedule in April 2004 and will continue until mid-2007.

– Progressing in the US Navy’s Littoral Combat Ship project through the award of a final design contract to the General Dynamics team in which Austal is the ship designer and builder. This contract includes provision for options for the construction of two 127-meter vessels following the completion of the design phase in October 2005. The U.S. Navy may ultimately purchase 60 ships over a 15-year period.

– Considerable interest in Austal’s trimaran technology from current ferry operators.

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