AUSTAL LIMITED — Investor Presentation 2015

Oct 14, 2015

Macquarie Western Australia Forum

==> picture [109 x 54] intentionally omitted <==

Andrew Bellamy, Chief Executive Officer

15 October 2015

Overview – about Austal

==> picture [92 x 44] intentionally omitted <==

Founded in 1988, publicly listed since 1998, and now an ASX-200 company, Austal is a leading defence prime contractor specialising in the design, construction and maintenance of high performance vessels for defence and commercial purposes with 250+ ships designed, built and delivered.

• Austal has a global footprint with strategically located shipyards and service facilities:

• Australia

• United States

• Philippines

• Europe

• Middle East

• Asia

 Austal’s focus is on the delivery of three product platforms: Ships • Systems • Support

==> picture [659 x 199] intentionally omitted <==

----- Start of picture text -----

SHIPS SYSTEMS SUPPORT
----- End of picture text -----

SHIPS  SYSTEMS  SUPPORT

2

Overview – corporate snapshot

==> picture [92 x 44] intentionally omitted <==

Share price (2 years)

Board and management

==> picture [318 x 194] intentionally omitted <==

----- Start of picture text -----

$2.40
$2.20
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15
----- End of picture text -----

John Rothwell AO Non Executive Chairman David Singleton Independent Director Giles Everist Independent Director Jim McDowell Independent Director Andrew Bellamy Chief Executive Officer Greg Jason Chief Financial Officer

Financial overview (FY2015)

Corporate details

ASX Code Issued Shares Share Price (at 13 October 2015) Market Capitalisation PE ratio

Revenue EBIT ASB NPAT 347,420,634 Net debt $2.11 Interim dividend $733.1m Final dividend 13.19 Order book (at 30 Sept 2015)

$1.4b $84.8m $53.2m $6.1m 1.0cps, ff 3.0cps, ff $3.0bn

SHIPS  SYSTEMS  SUPPORT

3

Overview – shipbuilding programs

==> picture [92 x 44] intentionally omitted <==

• Order book of $3.0 billion as at 30 September 2015 secures revenue through CY2020, including:

• 11 Littoral Combat Ships for US Navy 10 funded, with 1 delivered, funding expected in FY2016 for eleventh vessel

o 10 Expeditionary Fast Transports (formerly Joint High Speed Vessel) for US Navy Fully funded, with 5 delivered

o 8 Cape Class Patrol Boats for Australian Border Force Fully funded, with all 8 vessels delivered, plus through-life support

o 2 High Speed Support Vessels for Royal Navy of Oman Fully funded

• Commercial vessels

• 2 high speed catamaran crew boats

==> picture [272 x 393] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

4

Objectives for sustained growth

==> picture [92 x 44] intentionally omitted <==

Strengthen operations and balance sheet

Ongoing Target objectives opportunities

• Shipbuilding margin achieved

• Successfully applied learning from first-inclass vessels

• Won new programs by leveraging off existing vessels

• Strong cash generation used to strengthen balance sheet

• Maintain cash generation to support programs and dividends

• Reduce debt

• Deliver on maturing programs and exploit learning from first in class ships

• Extend existing program pipeline

• Invest in R&D to grow intellectual property base

• Refresh product range to deliver increased capability

• Grow long term support and engineering services business

Delivered

==> picture [136 x 51] intentionally omitted <==

----- Start of picture text -----

Priority
----- End of picture text -----

Focus

SHIPS  SYSTEMS  SUPPORT

5

Financials

==> picture [109 x 54] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

6

Record revenue driving performance

==> picture [92 x 44] intentionally omitted <==

Revenue (A$m) EBITDA (A$m) NPAT (A$m) FY2014 FY2015 FY2014 FY2015 FY2014 FY2015

==> picture [68 x 55] intentionally omitted <==

----- Start of picture text -----

1,122.9
----- End of picture text -----

==> picture [68 x 122] intentionally omitted <==

----- Start of picture text -----

1,414.9
----- End of picture text -----

==> picture [69 x 48] intentionally omitted <==

----- Start of picture text -----

79.3
----- End of picture text -----

==> picture [69 x 117] intentionally omitted <==

----- Start of picture text -----

109.1
----- End of picture text -----

==> picture [68 x 35] intentionally omitted <==

----- Start of picture text -----

31.9
----- End of picture text -----

==> picture [68 x 134] intentionally omitted <==

----- Start of picture text -----

53.2
----- End of picture text -----

• Record revenue, with 26.0% increase over FY2014 driven by growing work on major navy defence and patrol boat programs and relative depreciation of AUD

• Record profit, with 66.8% increase in NPAT over FY2014

• Headline earnings include some non-cash benefit from mark-to-market revaluation on intercompany loans to reflect currency movements

SHIPS  SYSTEMS  SUPPORT

7

Segment breakdown

==> picture [92 x 44] intentionally omitted <==

($m) Ships Systems Support	**Other1 **	Total
USA Revenue 914.2 160.0 45.5 EBIT 59.6 2.0 4.3 EBIT Margin% 6.5 1.3 9.5	-	1,119.7
	(7.5)	58.4
	-	5.2
Australia Revenue 171.2 - 40.6 EBIT 26.3 - 5.7 EBIT Margin% 15.4 - 14.0	-	211.8
	(0.2)	31.8
	-	15.0
Philippines Revenue 29.3 - 9.4 EBIT 2.3 - (1.3) EBIT Margin% 8.0 - (14.2)	-	38.7
	-	1.0
	-	2.6

• USA: Schedule pressure on LCS 6 (now delivered), and a significant growth in profitability of the Support business

• Australia: Significant margin improvement from efficiencies on Cape Class Patrol Boat program

• Philippines: Delivering commercial vessels at profitable margin

1 unallocated overhead targeting growth

SHIPS  SYSTEMS  SUPPORT

8

Cash and debt

Cash flow	FY2015 (A$m)	FY2014 (A$m)	Change
Operating	110.4	41.6	68.8
Investing	(21.8)	19.0	(40.8)
Financing	(24.1)	(84.3)	60.2
Net increase	64.5	(23.7)	88.2

==> picture [92 x 44] intentionally omitted <==

• Strong operating cash flow which was enhanced by the sale of Hull 270 trimaran stock vessel

• Significant reduction in net debt

• Maintained low sustaining capital expenditure

• Extension to banking facility agreement progressing

Debt	At June 2015	At June 2014	At June 2013
Net debt ($m)	(6.1)	(71.5)	(137.1)
Leverage ratio	0.06	0.90	2.19

SHIPS  SYSTEMS  SUPPORT

9

Operations update

==> picture [109 x 54] intentionally omitted <==

==> picture [720 x 409] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

10

US Navy – Littoral Combat Ship

• 10 ship contract awarded as prime contractor, worth US$3.5 billion and additional 1 ship option

• Margin and schedule pressure on LCS 6, first in the block-buy contract. Austal implementing experience from LCS 6 to incrementally grow margin on subsequent vessels

o LCS 8 preparing for trials in late CY2015

• LCS 10 launched and christened

o LCS 12, 14, 16 & 18 under construction

• LCS program expected to be 52 ships

• Later ships (LCS 33 – 52) will be “upgunned” as future frigate

==> picture [92 x 44] intentionally omitted <==

==> picture [272 x 191] intentionally omitted <==

==> picture [271 x 191] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

11

US Navy – Expeditionary Fast Transport

==> picture [92 x 44] intentionally omitted <==

• Formerly Joint High Speed Vessel (JHSV), renamed by US Navy to Expeditionary Fast Transport (EPF)

• 10 ship award to Austal valued at US$1.6 billion (fully funded), securing work through to CY2017

• Program progressing well – matured into a phase of efficient production and predictable delivery

• EPF 1, 2, 3, 4 & 5 – delivered

• EPF 6 – launched & christened

• EPF 7, 8 & 9 – under construction

• US Navy interested in growing size and role of EPF fleet (strong potential for program expansion), while variants are gaining traction in the Middle East

• Confident of extension to program beyond existing block buy – EPF 11 funded by Congress (not yet contracted)

==> picture [272 x 191] intentionally omitted <==

==> picture [272 x 191] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

12

Austal strongly positioned in US

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Austal-built vessels have
continued to be funded and
programs are maturing well
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

US Foreign Policy remains
focused on Asia-Pacific
defence strategy
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

US Navy committed to
upgrading final 20 LCS as
future frigates and meet 52
vessel target – rate of
acquisition to be decided by
Congress
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Option awarded to Austal on
LCS 26 (can be exercised in
CY2016), while EPF 11
approved by Congress (yet to
be contracted)
----- End of picture text -----

==> picture [92 x 44] intentionally omitted <==

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Winning service contracts on
LCS and investing in support
business to best position
Austal for additional work
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

LCS variants attractive to
international market through
US Foreign Military Sales
----- End of picture text -----

SHIPS  SYSTEMS  SUPPORT

13

Australia – Cape Class Patrol Boats

==> picture [92 x 44] intentionally omitted <==

• $330 million contract for the design, construction and through-life support of 8 Cape Class Patrol Boats for the Australian Border Force (formerly Australian Customs and Border Protection Service)

• Program matured significantly, delivering significant efficiency gains that drove margin expansion

• Final vessel delivered in August 2015

• Austal now performing through-life support on completed vessels

• Opportunities exist for new contracts at home and abroad, with Austal able to deliver efficiencies gained from first block contract

==> picture [272 x 281] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

14

Australia – High Speed Support Vessels

==> picture [92 x 44] intentionally omitted <==

• US$124.9 million contract for the design, construction and integrated logistics support of two 72 metre High Speed Support Vessels for the Royal Navy of Oman

• Construction is progressing well at Henderson shipyard

• Completion of keel laying for both vessels in December 2014

• Final vessel to be delivered in late CY2016

• Deployed with a similar mission to the EPF program

• Strategy demonstrated of leveraging Austal’s intellectual property and technology to new defence markets

==> picture [272 x 191] intentionally omitted <==

==> picture [272 x 191] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

15

Australian defence shipbuilding

==> picture [92 x 44] intentionally omitted <==

• The Federal Government's plan for a strong and sustainable naval shipbuilding industry was announced 4 August 2015

Initiative	Impact on Austal
The Government will invest over $89 billion in ships and submarines for the Navy over the next 20 years.	A large, long-term order book of work available to naval shipbuilders in Australia. Austal in a competitive position to win a large portion as Australia’s only global, prime defence contractor.
The Government will implement a continuous build of surface warships in Australia.	Replacement of project-based orders with continuous build program offers long-term operational and revenue stability and efficiencies.

SHIPS  SYSTEMS  SUPPORT

16

Australian defence shipbuilding

==> picture [92 x 44] intentionally omitted <==

Initiative	Impact on Austal
Bringing forward the Future Frigate programme to replace the ANZAC class frigates from 2023 to 2020. The Future Frigates will be built in South Australia based on a Competitive Evaluation Process (CEP), which will begin in October 2015.	Variant of Austal’s LCS a potential platform for future frigate. (Upgunned LCS soon to be classed as a frigate by US Navy) Early CEP provides early revenue potential if successful. Possible expansion to South Australia to utilise Common User Facility at Techport, South Australia, in response to Government’s geographic requirement for the vessels’ construction.
Bringing forward construction of Offshore Patrol Vessels (SEA1180) to replace the Armidale class patrol boats by two years, with a continuous onshore build commencing in 2018 following a Competitive Evaluation Process.	Early CEP provides early revenue potential if successful plus revenue stability through continuous build. Austal will submit a competitive proposal: • It has built all of the patrol boats for Australian Navy and Customs for the past 17 years • Company’s export competitiveness demonstrates cost competitiveness • Capacity constraints in SA may limit construction to one class of vessel (future frigate) Capability requirements of Offshore Patrol Vessel expected in Government Defence White Paper to be released later this year.

SHIPS  SYSTEMS  SUPPORT

17

Philippines

==> picture [92 x 44] intentionally omitted <==

==> picture [258 x 201] intentionally omitted <==

• Delivered two 45 metre high speed catamaran ferries to Abu Dhabi National Oil Company in August 2015 under a $30 million design and construct contract

• Completed customisation of Hull 270 and delivered wind farm vessel to Turbine Transfers

• Commenced construction on two crew boats, to be delivered in Q3 CY2016:

==> picture [316 x 183] intentionally omitted <==

• 70 metre catamaran under US$34 million contract

• 58 metre catamaran under US$20 million contract

• Targeting new commercial vessel contracts, including fielding growing interest from the European ferry market

SHIPS  SYSTEMS  SUPPORT

18

Systems and Support

• Austal is steadily adding experience and capability to deliver a growing portfolio of Naval sustainment contracts

• US expanding activity beyond own vessels:

• Prime contractor for Post Shakedown Availability (PSA) and other post delivery test and trial programs on all Independence Class LCS

• Teamed with GD awarded Planning Yard services contract for the entire LCS fleet

• Australia transitioned Cape Class from construction phase to support phase, demonstrating value of Austal’s integrated design, build and sustainment products

• Footprint spanning Darwin, Henderson, Oman and Philippines well positioned to support increasing regional forward deployment of LCS and EPF

==> picture [92 x 44] intentionally omitted <==

==> picture [272 x 192] intentionally omitted <==

==> picture [272 x 177] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

19

Strate and Outlook gy

==> picture [109 x 54] intentionally omitted <==

SHIPS  SYSTEMS  SUPPORT

20

Strategy

==> picture [92 x 44] intentionally omitted <==

Sustain the business

• Maintain current annual revenue in medium to longterm through new contracts

• Additional defence vessel contracts in existing markets

• Export variant defence vessels

• Capture new opportunities in commercial vessels

Strengthen the business

• Improve margins by driving efficiencies / productivity in procurement and labour without impacting safety and quality

Diversify the business

• Grow annuity-style revenue by building on existing expertise, including sustainment work on Austal-built vessels

• Focus on strategic partnerships, investments in infrastructure and IT, upskilling staff, and differentiating from competitors

Scale the business

• Position Austal for future Navy programs in Australia

• Organic and acquisitive growth opportunities

Growth strategy to be supported by maturing vessel programs, significant order book, strong financial position and effective risk management

SHIPS  SYSTEMS  SUPPORT

21

Pipeline for vessel programs

==> picture [92 x 44] intentionally omitted <==

• Pursuing opportunities to deliver on strategy by growing Austal’s order book and securing additional long-term revenue

Target markets

Vessels

• US: strong potential to extend existing LCS and EPF programs

• Future frigate evolved from modified Littoral Combat Ship

• Australia: replacement of Navy vessels including patrol boats and future frigates under continuous shipbuilding program

• Middle East: opportunity for frigates, support vessels and patrol boats

• Expeditionary Fast Transports for US Navy

• Patrol boats developed from experience with Bay, Armidale and Cape Class vessels

• Europe and Asia Pacific: commercial vessels and work boats

• Variant high speed support vessels developed from Westpac Express and EPF

• Commercial vessels: potential new market for LNG-powered ferries and crew transfer vessels

SHIPS  SYSTEMS  SUPPORT

22

Outlook

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Margin improvement at US
operations as lessons learnt
from LCS 6 are applied –
greatest effect to be on
vessels at early stage
construction
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Target export opportunities
from Australia shipyard
through variant-style
defence vessels
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Good opportunity for award
of additional LCS and EPF
in addition to existing block
buy contracts
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Pursue organic and
acquisition opportunities to
grow support business in
US, with sustainment on
vessels reaching critical
mass
----- End of picture text -----

==> picture [92 x 44] intentionally omitted <==

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Best position Austal for
Pacific Patrol Boat
replacement, Future Frigate,
and OPV, and seek
extension of Cape Class
Patrol Boat program
----- End of picture text -----

==> picture [220 x 135] intentionally omitted <==

----- Start of picture text -----

Net cash position by end of
FY2016 to support growth
opportunities and underpin
dividends
----- End of picture text -----

SHIPS  SYSTEMS  SUPPORT

23

Disclaimer

==> picture [92 x 44] intentionally omitted <==

Andrew Bellamy, Chief Executive Officer

Telephone: +61 8 9410 1111

For further information visit www.austal.com

Disclaimer

This presentation and any oral presentation accompanying it has been prepared by Austal Limited (“Austal”). It should not be considered as an offer or invitation to subscribe for or purchase any securities in Austal or as an inducement to make an offer or invitation with respect to those securities. No agreement to subscribe for securities in Austal will be entered into on the basis of this presentation.

Our presentation contains “forward-looking” statements or projections based on current expectations. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to: the availability of US government funding due to budgetary or debt ceiling constraints; changes in customer priorities; additional costs or schedule revisions. Actual results may also effect the capitalization changes on earnings per share; the allowability of costs under government cost accounting divestitures or joint ventures; the timing and availability of future impact of acquisitions; the timing and availability of future government awards; economic, business and regulatory conditions and other factors. We disclaim any duty to update forward looking statements to reflect new developments.

Accordingly, to the maximum extent permitted by applicable laws, Austal makes no representation and can give no assurance, guarantee or warrant, express or implied, as to, and takes not responsibility and assumes no liability for, the authenticity, validity, accuracy, suitability or completeness of, or any errors in or omission, from any information, statement or opinion contained in this presentation.

You should not act or refrain from acting in reliance on this presentation material. This overview of Austal does not purport to be all inclusive or to contain all information which its recipients may require in order to make an informed assessment of Austal’s prospects. You should conduct your own investigation and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation before making any investment decision.

SHIPS  SYSTEMS  SUPPORT

24