Hanwha Targets Acquisition of Austal USA, Which Turned to Losses in U.S. Warship Projects

Austal USA, the U.S. shipbuilding company whose acquisition Hanwha is pursuing to secure warship construction facilities in the United States, has turned to losses for fiscal year 2026 (July 2025–June 2026). The cause of the loss was additional costs incurred during the U.S. warship construction process.

According to financial and investment industry sources on the 1st, Australian shipbuilder Austal announced via disclosures to the Australian Securities Exchange and other channels on the 31st (local time) that its U.S. segment (Austal USA) recorded a loss of A$202.28 million (approximately 199.3 billion won for Hanwha) in earnings before interest and taxes (EBIT) for fiscal year 2026 (July 2025–June 2026).

This marks a shift to losses compared to the A$97.7 million profit recorded in fiscal year 2025. U.S. segment revenue stood at A$1.3826 billion, nearly identical to the A$1.3881 billion reported in fiscal year 2025, while U.S. shipbuilding revenue increased by 3.9% to A$1.1402 billion.

However, EBIT for the U.S. construction segment turned into a loss of A$224.9 million, reversing from a profit of A$21.3 million in fiscal year 2025. Austal explained that as it transitioned from a follow yard to a lead yard in its role for the U.S. Navy's T-ATS (tug, salvage, and rescue ship) and LCU (landing craft utility) projects, additional costs not reflected in the original contract were incurred. A follow yard refers to a shipyard that constructs subsequent vessels based on basic designs and technical data created by the lead yard. The lead yard assumes overall technical responsibility for the project, including warship construction, design changes, and resolution of technical issues.

Austal USA requested an accelerated contractual relief procedure regarding the increased costs during warship construction, but the U.S. Department of War (formerly the Ministry of National Defense) did not accept it, leading Austal to reflect provisions in its accounting. Accelerated contractual relief refers to quickly compensating for disputes, losses, or additional costs through mutual agreement between contracting parties without undergoing lengthy formal adjustment procedures such as lawsuits. Austal plans to pursue formal claims procedures as well to attempt cost recovery.

Patrick Greig, CEO of Austal, responded during the earnings conference call when asked about Hanwha's acquisition efforts and whether there was prior awareness of the U.S. warship project contract structure: "Hanwha is fully aware of all our contract situations and has been thoroughly briefed on them in the United States."

Regarding the possibility of Hanwha completing its acquisition of Austal USA, CEO Greig stated, "Hanwha has maintained interest for a very long time and has not withdrawn. (Hanwha) has definitely commenced due diligence and is approaching this matter with great seriousness." He added, "Given the reports we are receiving and the fact that this matter has become public, it appears there is support from senior officials at the U.S. Ministry of National Defense."

It is known that Hanwha has been pursuing expansion by establishing local production bases in the United States with Kim Dong-kwan, Executive Vice Chairman, leading efforts to position the U.S. shipbuilding industry as a core growth pillar for the group. Although Hanwha initially proposed acquiring all of Austal in 2024, the Austal board declined the proposal at the time, citing uncertainty about whether it could pass national security reviews. This year, Hanwha opted to acquire only the U.S. business segment rather than the entire Austal company.

Hanwha Defense USA, Hanwha's local U.S. subsidiary, has proposed a corporate valuation for Austal USA of up to $1.2 billion (approximately 1.64 trillion won). Since Austal USA produces U.S. Navy warships and nuclear submarine modules (submarine assembly units), the transaction must undergo U.S. national security reviews including by CFIUS (Committee on Foreign Investment in the United States) to be finalized.

A defense industry official stated, "Hanwha previously attempted to acquire Pungsan (a domestic ammunition manufacturer), but the deal fell through after Pungsan withdrew." The official added, "While there are rumors of KAI (Korea Aerospace Industries) acquisition domestically, pursuing expansion with an eye toward acquiring U.S. warship projects overseas appears to reflect a desire for vertical integration, though regulatory environments remain a variable factor."