Austal upbeat for US prospects despite budget slog

Fri Dec 2, 2011 12:21am GMT

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* Austal sees foreign interest in new warships

* Company sees good prospects given low cost of ships

By Andrea Shalal-Esa

NEW YORK, Dec 1 (Reuters) - Australia's Austal Ltd (ASB.AX) said on Thursday it had orders for new U.S. warships valued at about $900 million a year through 2015 and was upbeat about future sales to the United States and other countries, despite a downturn in the U.S. defense budget.

"We think that we're really just scratching the surface in terms of the potential that we've got," Austal Chief Financial Officer Richard Simons told an investor conference hosted by Credit Suisse and Aviation Week.

Austal is one of two builders of the U.S. Navy's new Littoral Combat Ship (LCS), a fast and agile coastal warship, and is the only supplier of the Navy's new Joint High Speed Vessel. Austal's LCS model is an aluminum trimarin, while Lockheed Martin Corp (LMT.N) builds the other LCS model, a more traditional steel monohull design.

Navy shipbuilding plans call for the two new ships to account for 25 percent of the all U.S. Navy vessels by 2040.

Simons said Austal planned to expand its U.S. workforce from about 2,500 to around 4,000 by 2013 as it continues work on the eight LCS and seven JHSV ships already under contract.

The Navy has already committed to buying 10 each of the two warships and eventually expects to buy a total of 55 LCS ships and 44 JHSVs, which are based on a commercial high speed ferry. The Navy is counting on the new ships to help meet its goal of growing the naval fleet to 313 ships from around 286 now.

Simons said he was not too worried the Pentagon would back off its plans to buy dozens more of the lighter warships given their relatively lower cost compared with far more expensive submarines and surface destroyers.

Simons said Austal's LCS ships sold for about $380 million, while the JHSV ships went for about $180 million. Submarines and destroyers cost billions of dollars.

U.S. Navy orders would peak in 2015, but for now, the company was "still in ramp up mode," Simons said.

Austal also saw potential sales for servicing and maintaining its ships for the Navy once they were in service, which generally amounted to about 10 percent of the sales price of the ship per year, Simons said.

There was also foreign interest in the Austal LCS model, an aluminum trimaran, he said. Simons said Saudi Arabian naval officials had been to the company's shipyard in Mobile, Alabama, and other countries had also expressed interest. He declined to name them since foreign military orders are handled between governments.

A host of foreign naval officers were given tours when the first Austal LCS ship, named Independence, made an appearance at the 20th International Seapower Symposium (ISS) at the US Naval War College in Newport, Rhode Island last month. (Reporting by Andrea Shalal-Esa; editing by Andre Grenon)

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