HII, one of two US prime contractors capable of building nuclear-powered ships, has released its fourth quarter (Q4) and end-of-year financial results for 2023.
The company claims its Q4 revenues have expanded by 13% year over year (YoY), to a record $3.2bn. In line with this growth, HII also reported record 2023 revenues of $11.5bn, with YoY growth of 7.3%.
New contract awards in 2023 were valued at approximately $12.5bn, bringing the total backlog to approximately $48.1bn as of 31 December 2023.
In a statement, the shipbuilder stated it was a strong year for HII:
“We continue to invest both in our shipyards and in [our independent research and development] to both expand capacity and develop new products and solutions for our customers,” said Chris Kastner, HII’s president and CEO.
“Our growth rate for the year of over 7% and our free cash flow generation at almost $700m illustrate that we are entering a period of accelerated growth and increased free cash flow generation at HII.”
“Accelerated growth” in 2024 and beyond
The company incorporates three profitable divisions: Ingalls Shipbuilding, Newport News Shipbuilding and Mission Technologies.
Ingalls Shipbuilding 2023 revenues were $2.8bn, an increase of $182m, or 7.1%, compared to 2022. These figures were primarily driven by higher volumes in surface combatants and amphibious assault ships.
This year, the US Department of Defense called for HII to construct seven new flight III Arleigh Burke-class (DDG 51) destroyers – one in 2023, another in 2024, two in 2025, one in 2026 and another in 2027.
Newport News Shipbuilding 2023 revenues were $6.1bn, an increase of $281m, or 4.8%, compared to 2022.
These figures were primarily driven by higher volumes in aircraft carrier construction and engineering, the Columbia-class (SSBN 826) submarine programme, submarine services, and the Virginia-class (SSN 774) submarine programme.
Mission Technologies 2023 revenues were $2.7bn, an increase of $312m, or 13.1%, compared to 2022.
This was primarily due to higher volumes in command, control, communications, computers, cyber, intelligence, surveillance, reconnaissance, electronic warfare and space contracts.
Challenges in the US naval industrial base
“Our expectations are grounded in the assumption we must deliver on our commitments to our customers,” Kastner predicted. However, this is where the US naval industrial base faces pitfalls.
While the company predicts an unending profit margin going forward, that does not mean that the company will face severe problems, such as an overwhelming backlog.
The US naval sector is deeply overworked and under-resourced, most notably in submarine construction.
"It seems to me that we just simply don't have enough shipyard space."
Senator Rounds, Senate Armed Services Committee hearing on 18 April 2023.
Edward Bartlett – the founder and CEO of Bartlett Maritime, a corporation with the expressed purpose of assisting the US Navy with the resolution of the submarine capability shortfall – made it clear that “both additional industrial infrastructure and access to an expanded labour pool are needed.”
Delays in maintenance are keeping platforms from operating at sea at an unprecedented rate.
The Congressional Research Service revealed on 25 September 2023 that the number of attack submarines (SSNs) either in depot maintenance or idle (i.e., awaiting depot maintenance) has increased from 11 boats (about 21% of the SSN force) in FY2012 to 18 boats (about 37% of the SSN force) as of May 2023.
During a Senate Armed Services Committee hearing in April last year, Senator Mike Rounds commented: “It seems to me that we just simply don't have enough shipyard space and is there a priority for the Columbia-class and the Ohio-class that is perhaps one of the reasons why the Los Angeles-class submarines are sitting at dry dock.”
As one of the US’ prime contractors HII are already well aware of the reality. In November 2023, the company announced it had begun work at a new campus in Norfolk, Virginia so that it could “free up critical storage space” at its main shipyard.
