VEEM Limited has finished its factory extension and installed new machinery, setting the stage for a stronger second half of FY26 and anticipated growth in FY27 driven by defence contracts and marine propulsion innovations.
- Factory extension adds 1,000m2 to support propulsion growth
- Three new CNC machines arriving with commissioning due in Q1 FY27
- FY26 revenue guidance between $50m and $52m with EBITDA $3.25m–$3.75m
- Defence segment recovery led by ASC order fulfilment in 2HFY26
- 3D printer installed with government grant funding to improve manufacturing
Factory Expansion Boosts Manufacturing Capacity
VEEM Limited (ASX:VEE) has completed construction of its factory extension, adding approximately 1,000 square metres of manufacturing space. This expansion is designed to accommodate increased production demands, particularly for its VEEM Extreme propulsion products, which require longer machining times due to their high-tensile materials. The company is poised to install and commission three new CNC machines imminently, with completion expected during the first quarter of FY27. This upgrade not only increases capacity but leaves room for future equipment additions, underpinning VEEM’s growth ambitions across propulsion, defence, and engineering sectors.
Technology Investment Supported by Government Grant
Alongside the factory extension, VEEM has installed and commissioned a 3D printer, funded in part by a $1 million government grant under the Defence Industry Developments Program. The remaining $600,000 of the grant was recently received. This advanced manufacturing technology is expected to enhance production accuracy and speed, potentially improving margins and expanding the company’s product offerings to existing and new customers.
FY26 Trading Update Reflects Transition and Recovery
VEEM projects FY26 revenue between $50 million and $52 million, with EBITDA expected in the range of $3.25 million to $3.75 million. This represents a significant improvement over the first half of the year, driven primarily by increased defence revenue from the fulfilment of Australian Submarine Corporation (ASC) orders received late in 2025 and early 2026. The marine propulsion segment is also showing signs of recovery, with continued deliveries to launch customers for the VEEM Extreme propellers, including Manly Fast Ferries, which reported an 8.3% fuel burn reduction with the new technology.
Defence Segment Poised for Growth Amid Market Opportunities
Defence revenue in the first half was down 49% due to delayed ASC orders, but the second half is expected to see a substantial rebound as these orders are delivered. VEEM remains a key supplier for the Collins Class submarines and is advancing its position in the Hunter Class Frigate Program, moving toward final tender stages with BAE Systems Australia. The company is also making inroads into the US defence supply chain, holding approved supplier status with major contractors and a nine-year manufacturing licence agreement with Northrop Grumman valued at up to US$33 million. These developments position VEEM well to capitalise on increased sovereign defence spending and initiatives such as AUKUS.
Gyrostabiliser Sales Expected to Accelerate in FY27
Following the launch of the next-generation Mark III gyro stabiliser in the first half of FY26, VEEM has seen a temporary pause in sales, with only one unit sold in the second half so far. The company anticipates sales to pick up significantly in FY27, leveraging the product’s improved design features such as a patent-pending oiling system and reduced power consumption. As the sole global supplier of large gyrostabilisers for marine vessel stability, VEEM is pursuing new opportunities in commercial and defence markets.
Financial Position Strengthened by Capital Raise
The company’s balance sheet has been fortified by a $13.1 million net capital raise during the half-year, reducing net debt to $1.8 million at 31 December 2025 and moving to a net cash position of $0.2 million by the end of January 2026. Operating cash flow remained strong at $4.0 million for the half-year, supported by the commencement of ASC contract phases. VEEM maintains significant undrawn facilities, including a $4.0 million overdraft and $2.4 million in trade facilities, providing ample liquidity for ongoing investments.
Bottom Line?
VEEM’s factory expansion and machinery upgrades set a solid foundation for growth, but FY27 success hinges on execution of defence contracts and market uptake of new propulsion and gyro products.
Questions in the middle?
- Will VEEM’s defence revenue ramp in 2HFY26 sustain momentum into FY27 amid competitive pressures?
- How quickly will VEEM Extreme and Mark III gyrostabiliser sales translate into meaningful profit contributions?
- What impact could geopolitical tensions and supply chain dynamics have on VEEM’s US defence market ambitions?