Austal to anchor Australian shipbuilding, Civmec may pivot amid naval changes

Austal Limited, an Australian shipbuilder, has solidified its position as the exclusive shipbuilder at the Henderson yard in Western Australia. This development follows a strategic review by Australian Defence Ministers Richard Marles and Pat Conroy recommending industry consolidation, which resulted in a 2.5% rise in the company’s stock prices. The partnership aims to prevent potential layoffs at Austal due to expiring contracts and paves the way for the company’s expansion, possibly displacing other firms like Civmec and Silver Yachts due to the need for space and security protocols for nuclear submarine infrastructure.

In a significant move for the local job market, Austal secured a $157.1 million contract from the government to build two Evolved Cape Class patrol boats, ensuring job security for 400 workers and presenting an alternative to fly-in-fly-out (FIFO) work arrangements prevalent in Western Australia. This contract aligns with Australia’s strategic ten-year shipbuilding model designed to end boom-bust cycles in the industry and foster workforce retention through continuous work streams.

The strategy also includes expanding Austal’s workforce potentially threefold due to an army landing crafts expansion project. Although Austal initially lost the medium landing craft bid made with BMT and Raytheon (NYSE:), it subsequently won the bid with Birdon’s design, which is set for delivery by 2026. The selection process for heavy landing craft designers is still underway, with deployment anticipated by 2028.

Defence Minister Pat Conroy endorsed this approach as beneficial for both the Australian Defence Force (ADF) requirements and taxpayer interests. It emphasizes efficient and effective fulfilment of ADF needs while ensuring value assessments and adherence to key performance indicators (KPIs). Austal CEO Paddy Gregg anticipates finalizing this transformative partnership by late 2024.

Civmec, currently engaged in defence projects including Offshore Patrol Vessels (OPVs) designed by German firm Luerssen, is contemplating refocusing towards its core offshore oil and gas operations amidst Australia’s naval fleet revision. This revision could replace OPVs with corvette or frigate vessels that would be constructed by Austal if approved. The shift in focus reflects changing priorities within Australia’s defence strategy and could have significant implications for Civmec’s involvement in future defence sector projects.

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