Austal is facing an initial loss on its multi-billion dollar deal to build state of the art aluminium warships for the US Navy.
In early trade, its shares fell 17% to $1.002, well below a 12 month high of $2.56.
The Perth-based company announced a one-off $US115 million ($A154 million) write back of work in progress on the $US4 billion ($A5.3 billion) trimaran program.
The cost of building the Littoral Combat Ships to meet shock rating standards and US Navy rules was materially more than estimated.
“The change of estimate means that too much revenue and profit was attributed to work already completed,” Austal says.
Austal expects to record an EBIT (earnings before interest and tax) loss of between $116 million and $121 million for the 2016 financial year.
The adjustment does not affect Austal’s cash position because billings to the US Navy are calculated based on actual cost incurred, not revenue booked.
CEO David Singleton says the financial impact is clearly disappointing. However, he says the outlook for the US business is positive for the generation of future profits and cash flows.
“Austal remains in a strong financial position and is continuing to generate positive operating cash flows, which will support ongoing debt reduction and returns to shareholders,” he says.
The company has a 2017 EBIT guidance of $A45 million to $A55 million on revenue of $A1.4 billion and plans no change to dividends.