Austin Engineering has lowered its FY26 revenue and EBIT forecasts due to challenges in key contracts and operational inefficiencies, while outlining strategic measures to restore profitability.
- FY26 revenue guidance cut to $370m-$380m from $390m-$410m
- Underlying EBIT guidance reduced to $30m-$34m from $40m-$46m
- Loss-making OEM contract impacting Chile and Indonesia operations
- Operational disruptions and workforce adjustments in Indonesia
- Cost control and efficiency initiatives underway across all regions
Austin Engineering Revises FY26 Outlook
Austin Engineering Limited (ASX, ANG) has announced a downward revision to its FY26 financial guidance, reflecting a combination of external market pressures and internal operational challenges. The company now expects revenue between $370 million and $380 million, down from the previous range of $390 million to $410 million. Similarly, underlying EBIT from continuing operations is forecasted at $30 million to $34 million, a significant reduction from the earlier $40 million to $46 million estimate.
Challenges in Key Contracts and Regions
A major factor behind the revision is an original equipment manufacturer (OEM) contract signed in 2024, which has proven commercially difficult. Production initially constrained in Chile was shifted to Austin’s Indonesian operations, but both locations have experienced profitability pressure as a result. The company has halted acceptance of new orders under this contract until terms improve, with existing orders to be completed at a reduced rate in Chile through March 2026.
Further compounding issues, Austin Indonesia faces deferred work from a significant local customer due to operational disruptions at a mine site, leading to underutilization and fixed cost recovery challenges. Additionally, a downturn in Australian coal sector orders has prompted workforce reductions in Indonesia.
Meanwhile, Austin Chile has grappled with excess steel wastage on products manufactured between July and September 2025, a legacy of work-in-progress predating recent process overhauls. The company is addressing this through improved steel nesting processes and tighter material controls, overseen by its North American team.
Operational Improvements and Cost Controls
In response to these pressures, Austin has implemented a suite of operational changes. In Chile, leadership has been strengthened with a new Vice President Americas and General Manager, alongside upskilling initiatives and adoption of North American manufacturing systems. Shift rosters have been adjusted to enhance workforce oversight and efficiency, with expected reductions in staff and costs.
The North American business unit, which accounted for 39% of FY25 revenue and grew 54% year-on-year, is also facing profitability headwinds due to labour inefficiencies and reliance on contract labour and outsourcing amid rapid expansion. To counter this, Austin is investing in workforce development through its weld school, mentoring programs, and Lean Manufacturing practices aimed at reducing idle time and improving production flow. Outsourcing has been significantly curtailed following recent facility upgrades.
Across all operations, new reporting and oversight protocols focusing on productivity, steel wastage, and consumable usage have been introduced, with weekly monitoring to ensure tighter control over cost drivers.
Looking Ahead
CEO Sy van Dyk acknowledged the disappointment of revising guidance but expressed confidence in the company’s strategy and product demand. He emphasized the swift implementation of corrective measures designed to restore profitability and operational efficiency. The coming months will be critical as Austin works to stabilize its business and demonstrate the effectiveness of these initiatives.
Bottom Line?
Austin Engineering’s FY26 revision signals a pivotal moment as it tackles operational inefficiencies and contract challenges to reclaim growth momentum.
Questions in the middle?
- How quickly will the OEM contract issues be resolved and profitability restored?
- What impact will workforce reductions and operational changes have on long-term productivity?
- Can the North American unit sustain growth while improving labour efficiency?