Huntington Ingalls Industries — the owner of Newport News Shipbuilding — says it probably won’t make as much money this year as it hoped.
That caused its stock to drop by more than 25%.
Chris Kastner, the CEO of HII, told investors on its third quarter report call Thursday that lingering workforce impacts from the pandemic are one big reason.
“The combination of material delivery, delays and inexperience leads to labor inefficiency and in some cases, to rework, which affect program schedules,” Kastner said.
He also pointed to delays in negotiating Navy contracts as a contributor to the decreased earnings estimates for the year.
“These ship contracts, which provide long-term revenue visibility, did not anticipate in their cost targets the significant disruption of our workforce and supply chain or the subsequent inflation experienced by us and the broader economy,” Kastner said.
But those aren’t the only problems the company has been facing.
In September, HII flagged faulty welds on vessels built at Newport News Shipbuilding. Within weeks, welds on more than two dozen vessels had been identified as faulty, including three in active service.
In a letter to Congress, Navy Secretary Carlos Del Toro said the branch was exploring legal options over the suspected faulty welds and referred the matter to the Department of Justice.
HII said at the time that it had discovered through internal investigations that some workers had “knowingly circumvented certain welding procedures” and notified the Navy. It says that there was no malicious intent.
That news did not cause a significant shock to the company’s stock at the time.
HII is one of two companies that builds nuclear-powered vessels for the Navy. Executives from the company were named in the latest round of personal sanctions from Russia.
HII’s stock was trading at $251 per share when markets closed Wednesday evening. By late Friday, a day after the third-quarter call, the stock was steady around $187 per share.
