Why Austal is a value packed share, page-90

ASB had revenue of ~$2086M in FY 20, so each 1c drop in the USD might lead to ~ $10M drop in revenue, assuming all things being equal. ASB only had profit margin of 4.3% in FY20, so resulting earnings and hence share price are likely to be more sensitive to changes in revenue.

@zamberdine

Surely, you are aware that all the ships built by Austal for the US Navy are manufactured at the Austal USA facility in Mobile, Alabama. So, while it is true that the vast majority of ASB’s revenue is US$-denominated, so are the corresponding operating costs. A$/US$ translation risk in the Income Statement, before any currency hedging, is therefore essentially limited to the EBIT of the US subsidiary, which was 82mUS$ (or 123mA$) in FY20.

If you look at page 116 of the 2020 Annual Report, you can see that during FY20 the Company bought ~117mA$ (on a net basis) of currency via FX forward contracts, almost completely neutralising their A$/US$ risk for the financial year. Of course, because forward hedging is done on a periodic rolling basis, a prolonged appreciation of the A$ would be detrimental to the value of the future US$-denominated EBIT amounts that are still to be hedged; nonetheless, ASB’s Group NPAT is far less sensitive to currency movements than your statement above seems too imply.

Cheers