Austal Shares Surge Over 15% Despite $175M US Loss Amid Fresh Hanwha Takeover Proposal
Key Takeaways
- •Austal's US division recorded an approximately $175 million EBIT loss driven by a non-cash provision related to legacy contracts for which accelerated contractual relief will not be granted.
- •Hanwha Defence US has proposed a $1.05 billion acquisition of only Austal's US operations, a structure Austal says would preserve its Australian business and ASX-listed shares.
- •Hanwha previously attempted full acquisitions of Austal in 2023 and 2024 but was unable to secure political approval in Canberra, and currently holds a 9.9% stake in the company.
- •Any acquisition of Austal's US defense assets by Hanwha would require regulatory review by CFIUS in the United States and FIRB in Australia.
- •Austal's Australasia business reported unaudited pre-tax earnings expectations of approximately $62 million, partially offsetting losses at the US division.
Government-backed shipbuilder Austal Ltd (ASX:ASB) emerged as one of Tuesday's top gainers, with shares climbing more than 16%, despite reporting an approximately $175 million EBIT loss at its US division — the same operations now targeted under a fresh $1.05 billion takeover proposal from South Korean shipbuilding giant Hanwha.
Austal USA is a significant contractor for the United States Navy, constructing aluminum-hulled vessels including the Independence-class Littoral Combat Ships and Expeditionary Fast Transports at its shipyard in Mobile, Alabama — assets that carry strategic value at a time when the US is seeking to expand domestic naval shipbuilding capacity.
The loss stems from Austal USA's reassessment of contractual claims after the company determined it would not receive accelerated contractual relief for certain legacy contracts.
"Austal USA has reassessed recoverability of contractual claims after determining it will not receive accelerated contractual relief for certain legacy contracts, resulting in an expected non-cash provision and an Austal USA EBIT loss of approx. $(175) million … Austal USA has commenced the formal contractual process to recover value on these contracts," the company stated.
Despite the substantial US loss, investors appeared to look past the result, with market attention focused on renewed acquisition interest from Hanwha, operating through its US-based subsidiary, Hanwha Defence US.
Hanwha previously attempted to acquire Austal outright in both 2023 and 2024, but those proposals did not gain political approval in Canberra. Under the current proposal, Hanwha Defence US is seeking to acquire only Austal's US operations — a structure that Austal indicated would not affect its Australian business or its ASX-listed shares. Austal framed this arrangement as more conducive to protecting Australian shipbuilding sovereignty.
The proposed carve-out structure may represent a strategic effort by Hanwha to navigate political sensitivities while still securing the US assets. Any such acquisition of US defense assets by a foreign entity would also be subject to review by the Committee on Foreign Investment in the United States (CFIUS), while Australian-side approvals would fall under the Foreign Investment Review Board (FIRB).
Hanwha acquired a 9.9% stake in Austal last year.
Separately, Austal flagged unaudited earnings expectations before tax of approximately $62 million from its Australasia business, providing some offset to the US division's losses.
The $175 million US loss is classified as a non-cash provision, and Austal indicated it has initiated formal contractual processes to recover value on the affected legacy contracts.
