Austal (ASX:ASB): Building war ships in Donald Trump’s America

Austal (ASX:ASB) is a good option for investors wanting a stock that’ll be a beneficiary of Trump’s ‘Made in America’ ambitions, because Austal makes things in America. Plus, it makes ships in and for Australia too. This author last wrote about the company this time last year when the threat of tariffs were wreaking havoc on the markets, but Austal pulled off a feat of raising $200m. Yes, it led to a share price decline of 17% in a day because it was at a discount to the current share price, but we still thought it was no mean feat. Or maybe it wasn’t given the position the company was in.

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Overview of Austal

Austal is headquartered in Perth and has ship building facilities in Australia and the US as well as the Philippines and Vietnam. the company initially built high-speed aluminium ferries before pivoting toward defence shipbuilding, particularly for the United States Navy and Royal Australian Navy. Over time, Austal established major shipyards in Mobile, Alabama and the Philippines, transforming itself into a globally relevant naval contractor.

Ships are not easy or cheap to make, but the company is a leader in its sector and it is located in arguably the best region in the world to be in: the Asia-Pacific where maritime instability is arguably the worst in the world.

Just look at the company’s most recent annual results to see how things are.

Spectacular results and an evergrowing order book

In FY25, revenue rose 24% year-on-year to approximately $1.82bn, EBIT more than doubled to $113.4m, while net profit after tax surged to $89.7m. Cash generation was also strong, with net operating cash flow of over $400m and a net cash position of more than $450m, providing capacity for further investment in shipyard expansion and capability upgrades.

And we haven’t even mentioned yet the forward order book. At the end of FY25, the company reported an order book of approximately $13.1bn, including options, representing more than a decade of revenue visibility. This has since expanded materially. By February 2026, the order book had increased to a record $17.7bn, supported by around $5 billion in new Australian defence contracts under the Strategic Shipbuilding Agreement

Similar to Pro Medicus, expect to hear regular announcements from the company outlining new contracts that have been awarded – not necessarily from the ASX all the time and you may not always hear the name of the customer. But you can trust that it would be a government or defence company contracting to a government. After all, these ships don’t come cheap.

A year on from the tariff impact

When we last wrote about Austal a year ago, it had raised A$200m to fund expansion of its Alabama shipyard. Raising capital is a feat in and of itself in such a turbulent market. Existing shareholder Tatterang chipped in $41m to maintain its 19.6% share in the company – that’s Twiggy Forrest’s private office in case you didn’t know. But the very reason for the market turbulance could help Austal. Investors were scared that Trump’s tariffs could shut out companies from the US market that manufacture outside the US and import goods into the country.

Investors should never have feared an impact on Austal given it manufactures in America and it is building up its base in Alabama to cater for new contracts – this facility will be operational in FY26 and completed in FY27 if all goes to plan. There is reason for concern about Trump’s tariffs gradually causing dour economic conditions in many economies, but this shouldn’t affect defence spending, and in turn, not affect Austal.

A year on…

Looking at the business one year on from the reintroduction of tariffs under a Trump-led US policy framework, Austal has been relatively insulated compared to other industrial companies. Geopolitical tensions, including the ongoing Iran conflict, further reinforce this dynamic. While Austal has no direct exposure to Middle Eastern operations, heightened global instability typically translates into higher defence spending among Western nations, particularly in naval and maritime security.

This is especially relevant given the strategic importance of shipping lanes and the Indo-Pacific region. For Austal, this environment supports both near-term contract flow and long-term budget commitments from key customers. However, it also introduces execution risk, as governments may prioritise speed of delivery, increasing pressure on shipbuilders to meet timelines and manage complex supply chains.

From an operational perspective, Austal’s outlook is underpinned by three key drivers. First is the ramp-up of new Australian defence programs under the Strategic Shipbuilding Agreement, which should materially increase domestic revenue and improve utilisation of the Henderson shipyard. Second is continued growth in the US business, particularly as new classes of vessels replace legacy programs such as the Littoral Combat Ship. Third is the expansion of the support segment, which management expects to reach around $500m in revenue by FY27, providing a higher-margin and more predictable earnings stream.

But Austal is not risk-free

There are, however, risks to consider. Shipbuilding remains a complex, labour-intensive industry, and Austal has previously faced cost overruns and contract provisions on certain US programs. Execution on large fixed-price contracts remains a key sensitivity, particularly as the company scales up capacity in both Australia and the United States. Additionally, while defence spending is currently supportive, it is inherently political and subject to budget cycles and policy shifts.

Conclusion

Austal is a company that should be a beneficiary of the increasing spending on defence capabilities. There are few companies with an order book as large as Austal has, which will mean it will receive billions of dollars over the next several years.