Security Conditions and US Approvals Cloud Hanwha’s Austal Investment Expansion
The Australian Treasurer has approved Hanwha Corporation’s increase of its direct equity stake in Austal Limited from 9.9% to 19.9%, setting the stage for potential strategic partnerships as Austal rides a wave of record revenues and defence contracts.
- Hanwha’s direct shareholding in Austal rises to 19.9%, approved by Australian Treasurer
- Approval subject to strict conditions on access to sensitive information and board nominations
- Austal reports record FY25 revenue of $1.8 billion and EBIT of $113 million
- Order book exceeds $13 billion with strong growth prospects in US and Australasian defence markets
- US regulatory approvals remain uncertain, complicating Hanwha’s full investment ambitions
Hanwha’s Stake Increase Approved Amid Strategic Defence Growth
The Australian Federal Treasurer, Jim Chalmers, has given the green light for South Korean shipbuilder Hanwha Corporation to increase its direct equity stake in Austal Limited from 9.9% to 19.9%. This approval, granted through the Foreign Investment Review Board, comes with stringent conditions designed to safeguard sensitive information and govern any potential board nominations by Hanwha.
Austal’s CEO Paddy Gregg acknowledged the decision with respect, emphasizing the company’s commitment to delivering value as Australia’s sovereign shipbuilder under the Strategic Shipbuilding Agreement (SSA). The agreement secures Austal’s role in building Tier 2 surface combatant vessels and positions the company as a key contributor to the US defence industrial base.
Robust Financials and Expanding Order Book
Austal’s recent FY25 results underline its strong market position, with record revenue hitting $1.8 billion and EBIT reaching $113 million. The company projects further growth, forecasting an EBIT of $135 million for FY26, which would set a new record. Its order book currently exceeds $13 billion, bolstered by anticipated contracts for Landing Craft Medium and Landing Craft Heavy programs in Australia.
Financially, Austal is well-positioned with a net cash balance of $450 million, enabling it to expand US shipbuilding capacity and fund existing orders. The company is also advancing key programs for the US Navy and Coast Guard, with plans to grow its Mobile, Alabama facility. Future opportunities tied to the AUKUS partnership and the expanding defence precinct at Henderson add to Austal’s promising outlook.
Governance and Regulatory Complexities Ahead
Hanwha has publicly expressed interest in partnering more closely with Austal, including seeking a board position. However, Austal’s board has made clear that any such nominations will be carefully scrutinized to ensure they deliver clear benefits to all shareholders. Considerations include the impact on board governance, security protocols given the national security sensitivities, and the value Hanwha’s shipbuilding expertise might bring.
On the regulatory front, Austal has highlighted ongoing complexities with US authorities. While the Committee on Foreign Investment in the United States (CFIUS) has responded to Hanwha’s request to increase its stake, Austal now considers it unlikely that approval beyond 19.9% will be granted. Additionally, separate approvals from the US Defense Counterintelligence and Security Agency (USDCSA) remain necessary for any future changes in control, adding layers of regulatory oversight.
Austal’s Strategic Position in a Changing Defence Landscape
This approval marks a significant milestone for Austal as it navigates a dynamic defence sector marked by heightened expenditure and a renewed focus on sovereign capability. With strong financial footing, a robust order book, and strategic partnerships on the horizon, Austal is poised to capitalize on growth opportunities across Australia, the US, and beyond.
However, the conditions attached to Hanwha’s increased shareholding and the unresolved US regulatory approvals underscore the delicate balance Austal must maintain between growth ambitions and national security considerations.
Bottom Line?
As Austal embraces new partnerships and record growth, the coming months will test how it balances expansion with stringent security and governance demands.
Questions in the middle?
- What specific conditions will the Treasurer impose on Hanwha’s access to sensitive information?
- Will Hanwha formally seek a board position, and how will Austal’s board respond?
- How will unresolved US regulatory approvals impact Hanwha’s future investment plans?
