Austal said it has struck a settlement agreement that will end a legal dispute that meets the description of its battle with Malta's Virtu Ferries.

The Australian shipbuilder said in an earnings report that it "took an opportunity" to end arbitration over a defect in a commercial vessel that was delivered to a European customer seven years ago.

Austal said its fiscal first half earnings took a AUD 13.2 ($10.1m) hit as a result of the settlement.

Avoiding arbitration risk

"The settlement avoids the risk of an adverse arbitration outcome and the cost of continuing complex arbitration in the United Kingdom and was judged to be a prudent outcome for the business," the Sydney-listed outfit said.

While the other company involved in the battle was not disclosed, TradeWinds has previously reported that Austal was locked in an arbitration fight with Virtu over construction of the 800-passenger, 230-car Jean de la Valette (built 2010).

Virtu, which operates ferry services between Malta and Sicily, had argued that Austal should have alerted it to defects in the ropax ferry's welds.

Austal chief operating officer Andrew Bellamy and Virtu Fast Ferries managing director Francis Portelli celebrate the delivery of the Jean de la Valette.

Austal revealed the agreement to end the dispute as it reported first-half profit of AUD 9.1m, down from AUD 16.8m in the first half of the prior fiscal year.

"Austal’s diversity across geographies and vessel programs meant the company was able to deliver a profit and maintained dividends to shareholders despite two of our shipyards being in a transition period," said chief executive David Singleton.

Revenue dipped to AUD 649m during the period, compared to AUD 747m in the first half of the earlier fiscal year.

But the company hiked its outlook for 2017.

Austal now expects to deliver between AUD 55m and AUD 60m in underlying earnings before interest and taxes, though its guidance for headline EBIT remains unchanged at between AUD 45m and AUD 50m.

"We are in the midst of bidding multi-billion dollar defence and commercial vessel opportunities that can be designed, built, and sustained at our shipyards in the US, Australia and the Philippines," Singleton said.