Shares in shipbuilder Austal Limited (ASX: ASB) sunk around 16% to $1.20 this morning after the company announced its chief executive, Andrew Bellamy, would leave the business this April. Mr Bellamy will be replaced by David Singleton who has served as a non-executive director on the Austal Board since December 2011.
The new chief executive is reported to have broad experience in civil and defence contracting, with a big task on his hands given the stock has now collapsed in half from prices it traded at just last November.
The company is contracted to design and builds multiple combat vessels for the US Navy, while it also builds and sells an extensive range of patrol and auxiliary vessels for other government agencies globally, including the Australian border force.
However, shares fell around 30% in December after the company conceded it was experiencing problems with its contracted Littoral Combat 6 shipbuilding project in the US.
The problems mean US shipbuilding margins are now expected to be in the range of 4.5% to 6.5%, which is lower than previously expected and likely to have an impact on earnings. Blame for the falling margins was attributed to "schedule pressures" and failure to apply productivity enhancements among other things.
Investor nervousness over the change in management and falling margins is likely to remain, although the company did announce another big new US$198 million contract prior to Christmas and is a likely beneficiary of the falling Australian dollar.
The share price is likely to reverse course if it can win new contracts and build its order book, as revenue and earnings growth should follow, although it looks a stock to watch from the sidelines for now.
