Huntington Ingalls expects to see business boom in the coming years as the defense budget grows under the Trump administration. The company expects to receive orders for more than two-dozen warships before 2020.
“I have to tell you that this is the most exciting time I have seen in my 30-plus years in shipbuilding,” Mike Petters, Huntington Ingalls president and chief executive officer, told investors. “This new work supports our sales outlook for the next five years, and forms the foundation that will support the business for the next 10 to 15 years.”
Over the next several years, business should grow at a very robust pace for the company. “What we are experiencing now and expect to experience over the next two years is that the mix of contracts and production is a bit out of balance with more new work than normal,” Petters said. “And this puts pressure on the blended return on sales rate. Recognizing this phenomenon, we expect the return on sales for shipbuilding to be in the seven percent and nine percent range for 2018 and 2019.”
Right now, Huntington Ingalls has back orders for more than two-dozen warships and that order book will continue to grow. “At the end of Q1 2018, we had approximately 25 ships under contract to be constructed in our facilities,” Petters said. “By the end of 2020, if all goes as planned, we will see a significant amount of contracting activity that is expected to result in the award of base contracts or options to be exercised for 20 to 30 ships. This includes the DDG 51 multiyear procurement, VCS Block V, CVN 80 and 81, NSC 10 and 11 and LPD Flight II.”
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Huntington Ingalls is investing approximately $1.8 billion of capital to improve efficiency, capacity and affordability at its facilities to improve its production. “At Ingalls, the team is focused on completion of DDG 117, NSC 7 and LHA 7 in the second half of this year,” Petters said. “At this same time, they are preparing for the future as the proposal for the next DDG 51 multiyear procurement was recently submitted to the Navy. And Ingalls began reactivating shipbuilding facilities on the east bank of the Pascagoula River. These facilities will provide additional capacity to support Ingalls’ current ship construction and modernization programs, as well as help us better prepare for future work, including next-generation amphibious assault ships and surface combatants.”
Thus, the future looks bright for the company as America embarks on a massive military build up. “We are seeing the early stages of top line growth that supports our outlook for sales and shipbuilding over the next five years, and we are investing in the facilities to support this growth,” Petters said. “Our partnership with the Navy and solid program execution allow Congress and the administration to provide stable, and in some cases, accelerated funding for programs.”
Dave Majumdar is the defense editor for the National Interest. You can follow him on Twitter: @davemajumdar.
Image: Ingalls Shipbuilding completed builder's sea trials for Ralph Johnson (DDG 114). The Arleigh Burke (DDG 51) destroyer spent more than three days in the Gulf of Mexico testing the ship’s main propulsion, combat and other ship systems. U.S. Navy photo by Andrew Young/HII / Wikimedia Commons