Austal Ltd (ASX: ASB) shares are heading north on Monday after the defence shipbuilder released its FY26 results.
At the time of writing, the Austal share price is up 3.42% to $4.24.
That is despite the company reporting a statutory net loss of $53.6 million, compared with an $89.7 million profit a year earlier.
So, why are investors buying up the shares?
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Revenue tops $2 billion
Austal reported FY26 revenue of $2.03 billion, up 11% from $1.82 billion last year.
However, earnings were hit hard by problems within its US business.
Group EBIT swung from a $113.4 million profit in FY25 to a $125.2 million loss, largely due to provisions linked to several loss-making US contracts.
Operating cash flow also dropped to $62.5 million from $406.3 million, while net cash finished the year at $186.3 million.
The company did not declare a dividend as it continues investing heavily in new production capacity.
Australasia is doing the heavy lifting
Austal's Australasian business delivered revenue of $650.7 million, up 49% from the previous year.
EBIT climbed 137% to a record $85.3 million, with the EBIT margin increasing to 13.1%.
That growth was helped by higher shipbuilding activity and the ramp-up of major Australian defence programs.
Austal's Australasian defence order book has also jumped to around $5.6 billion, compared with just $700 million a year earlier.
That includes work under the strategic shipbuilding agreement, along with the landing craft medium and landing craft heavy programs.
Austal Chief Executive Paddy Gregg said the existing and expected contract pipeline gives the company a path to potentially double Australasian revenue over the next 5 years.
A huge order book could be supporting the shares
Another number that stands out is Austal's overall order book.
The company finished FY26 with around $16.5 billion of work, including options, across its Australian and US operations.
Its US order backlog alone is around $10.9 billion, while Austal continues expanding its submarine module manufacturing capacity.
Management is also targeting around $500 million of support and sustainment revenue in FY27.
The company said it expects to return to profitability in FY27 as it works through the issues affecting its US contracts.
What happens next?
Investors will also be watching the proposed sale of Austal USA.
South Korea's Hanwha Defence has submitted an indicative offer valuing the US business at between US$1.05 billion and US$1.2 billion.
Hanwha has been granted due diligence, although there's no guarantee a deal will go ahead.
Nonetheless, a sale at that level would leave Austal with a much stronger balance sheet.
