Investors sink Austal shares after accounting blunder in US operations tank profit outlook

Austal shares have recorded their biggest loss in more than 10 years after investors lashed the naval shipbuilder over an accounting blunder that has scuppered its profit forecast and renewed scrutiny of financial controls at the group’s flagship US business.

Nearly $610 million was wiped from the Henderson-headquartered company as the stock dived as much as 28 per cent before pegging back ground to close $1.44, or 23 per cent, weaker at a nine-month low of $4.87.

It was the S&P-ASX200’s worst performer for the day, with Thursday’s after-trading disclosure of the US accounting gaffe exacerbated by Friday’s sharp 1.3 per cent retreat by the broader market.

Austal has wound back its expected profit for the 2026 financial year by 18 per cent after discovering guidance had been overstated by $24m because of a financial blunder at Austal USA.

Austal pinned the blame on double-counting of milestone shipbuilding incentives linked to the construction of towing, salvage and rescue support ships for the US Navy by Austal’s US shipyard in Mobile, Alabama.

Austal, which discovered the mistake during a review ahead of the release of its half-year results, said Austal USA had recognised some of the incentives on an accounting measure linked to how much of a vessel is completed as of balance date.

However, “these incentives had already been recognised in Austal USA’s forecast at full value for the remaining part of the program”, it said.

Subsequently, Austal said, the $US17.1m ($24m) “overstatement” had been included in last year’s guidance for a profit of $135m for the current financial year.

The forecast has now been slashed to an expected $110m, likely leaving Austal well short of last year’s profit of $130m.

Citi analyst Sam Teeger said “this discovery makes us incrementally more cautious on the US accounts and therefore the stock, which is disappointing given future contract awards are likely from the strategic shipbuilding program in Australia as well as other longer-term opportunities”.

Macquarie described the earnings revision as “disappointing”, but added that it took comfort from Austal’s “very strong ... medium-term outlook”.

It’s not the first time Austal has been hurt by lax financial oversight at Austal USA, which typically accounts for about 80 per cent of the Australian parent’s revenues.

In 2024, Austal agreed to pay a $US24m fine to settle a long-running fraud probe into the Mobile shipyard under a plea deal with the Securities and Exchange Commission and the US Department of Justice.

The investigation focused on three senior managers at Austal’s US business who were accused of manipulating financial information to overstate its financial results between 2013 and 2016, thereby inflating revenue and profit at the Australian parent.

A year earlier, its annual profit guidance was blown out of the water by inaccurate cost assumptions for a new steel production line in Mobile that has enabled Austal to bid for bigger naval contracts.

Henderson-based Austal is currently sitting on more than $15 billion of orders, most in the US, where it has built surface vessels for the US Navy and the US Coastguard.

It is also in line for a major share of $20b of contracts to build a Japanese-designed new frigate for the Royal Australian Navy.