The Austal Limited (ASX: ASB) share price has been a strong performer on Thursday.
In afternoon trade the shipbuilder's shares are up 6.5% to $4.38.
Why is the Austal share price charging higher?
Investors have been scrambling to buy Austal's shares today following the release of a half year result which revealed very strong profit growth.
For the six months ended December 31, Austal reported a 22% increase in revenue to $1.039 billion. This top line growth was driven by a strong performance from both its U.S. and Australia based shipbuilding businesses.
Pleasingly, its stronger revenue flowed through to earnings, with Austal reporting earnings before interest and tax (EBIT) of $59.9 million. This is up 48% on the prior corresponding period and was thanks largely to improving margins in the United States.
Austal reported a US shipbuilding margin of 8.1% for the first half. This was up from 7.1% a year earlier and is within its FY 2020 guidance of 7.5% to 8.5%. Net profit after tax grew even quicker and was up an impressive 72% to $40.8 million.
Despite its strong growth, the Austal board has declared an unchanged unfranked interim dividend of 3 cents per share. This franking position continues to reflect the predominance of Austal's earnings being generated in the USA, which do not generate franking credits. In addition to this, the company advised that the utilisation of carry forward losses and credits will offset its tax liability in Australia for several years.
Outlook.
Thanks to its stronger than expected first half and its positive outlook, Austal has upgraded its EBIT guidance for FY 2020.
It now expects a minimum of $110 million EBIT, up from its previous guidance of a minimum of $105 million.
The company continues to expect FY 2020 revenue of no less than $1.9 billion and its USA shipbuilding margin to be in the range of 7.5% to 8.5%.
