Key highlights:

• VEEM launched its Lloyd's Register-verified Extreme propulsion range, demonstrating an 18.1% overall fuel-efficiency gain during sea trials on a 400-passenger Sydney ferry.

• The company secured a nine-year licence with Northrop Grumman for precision components on the US Navy's Virginia Class submarine programme, with initial value reported at up to US$33 million.

• A six-year, roughly $65 million renewal with ASC for Collins Class submarine valve components, combined with a factory extension and three new CNC machines, positions VEEM for higher and more consistent output in FY27.

For a company that machines alloys to tolerances measured in fractions of a millimetre, VEEM Ltd (ASX:VEE) has picked an unusually punchy word for its latest marine technology: Extreme. The Perth engineer unveiled the range in November 2025, claiming double-digit fuel savings backed by independent verification, and has since widened its Canning Vale factory to house new machinery.

It is a bold pitch from a business that has just posted a distinctly un-extreme year, with revenue and profit both falling in FY2025. Yet beneath the softer numbers sit a run of contract wins, a landmark US defence licence and a growing factory: a classic bet on tomorrow rather than today.

Company Overview

Founded in 1968 and based at Canning Vale in Western Australia, VEEM is a precision engineering group spanning four divisions. Its marine gyrostabilisers are the standout: VEEM is the dominant supplier in the large-vessel segment, with a range from the VG120 to the VG1000SD, billed as the world's largest, and counts shipbuilders such as Damen among its customers.

Its propulsion arm makes fixed-pitch propellers for boatbuilders including Princess Yachts and Viking Yachts, while a defence division supplies components to the Collins Class submarines, Hunter Class frigates and Austal, and a foundry produces proprietary castings. It is a diversified base, but exposed to the lumpy rhythms of shipbuilding and defence.

Latest News

The headline is the launch of the VEEM Extreme propulsion range on 6 November 2025, an integrated system pairing a precision propeller with a twisted rudder and a flow-aligned shaft line. VEEM says it delivered an 18.1% overall fuel-efficiency gain, an 11.9% cut in fuel burn and emissions, and a 3.36-knot lift in speed during sea trials verified by Lloyd's Register.

The launch customer is Sydney's Manly Fast Ferries, which trialled the system on the 33-metre, 400-passenger Ocean Surfer and signalled plans to convert six further vessels over roughly 18 months. It also builds on VEEM's exclusive worldwide agreement with US firm Sharrow to commercialise a radically shaped inboard propeller, recognised in TIME magazine's Best Inventions of 2023.

Why Investors Are Watching

If the reported numbers underwhelm, the contract momentum does not. In August 2025 VEEM secured a six-year, roughly $65 million renewal with ASC to supply valve components for the Collins Class submarines. Weeks later it announced a nine-year licence with US giant Northrop Grumman for precision components on the US Navy's Virginia Class program, an initial value reported at up to US$33 million.

To fund the push, VEEM raised about $14 million through a placement at $1.30 per share, backed by major holder Perennial and the founding Miocevich family. The appeal is the combination: a defensible niche in gyrostabilisers, a foothold in strategic submarine supply chains, and a validated technology story. The question is how quickly those threads reach earnings.

Growth Opportunities

The Northrop Grumman licence is the most tantalising. VEEM has flagged requests for quote in the first half of FY26, with purchase orders anticipated as US submarine output climbs from around 1.2 boats a year toward more than two by 2028, giving the small-cap exposure to a decades-long procurement cycle.

On the commercial side, the Extreme range and Sharrow-by-VEEM propeller open a path into fuel-conscious ferry and workboat fleets worldwide. Underpinning both is the factory extension: roughly 1,000 square metres of extra space and three new CNC machines due for commissioning through the first quarter of FY27, part-funded by a $1 million Defence grant.

Risks

The most obvious risk is timing. VEEM's revenue swings on a handful of large gyrostabiliser and defence orders, and FY26 guidance sits well below FY2025's $68.7 million, a reminder that growth here is anything but linear.

Execution risk looms large too: ramping defence production, commissioning machinery and converting trials into firm contracts must all land roughly on schedule. The Northrop Grumman and Sharrow opportunities, while genuine, hinge on factors such as US submarine build rates and third-party commercialisation. Add thin margins and a volatile share price, and the case demands tolerance for choppy water.

Industry Outlook

The tailwinds are structural. Allied defence budgets, sharpened by AUKUS and rising submarine build rates in Australia and the United States, are funnelling long-term demand toward qualified local suppliers, a pool VEEM has worked hard to join.

In commercial marine, operators face mounting pressure to cut fuel and emissions, precisely what VEEM's Extreme system and Sharrow propellers claim to address, and Lloyd's Register verification carries weight. If VEEM can turn its gyrostabiliser leadership and propulsion credentials into repeat orders, it sits in two markets with durable rather than fashion-driven demand.

What to Watch Next

The near-term signposts are clear: delivery against FY26 guidance and signs the second-half defence uplift from the ASC contract is materialising, plus the pace of the Northrop Grumman relationship as early quotes convert into firm orders.

Investors should also track the Extreme trials, particularly whether Manly Fast Ferries proceeds with its six-vessel program. Finally, the factory: commissioning of the new CNC machines through the first quarter of FY27 will test whether extra capacity delivers higher, more consistent revenue.

Conclusion

VEEM enters the second half of 2026 with a story running ahead of its scoreboard. The financials describe a business in a trough. Yet the strategic pieces, a Lloyd's-verified propulsion range, a US submarine licence, a renewed Collins Class contract and a larger factory, are being assembled with clear intent.

For patient investors comfortable with lumpy earnings and execution risk, VEEM offers rare exposure to both allied defence supply chains and marine fuel-efficiency technology. For others, it is one to watch until the order book shows up in the profit line. Either way, the coming year should show whether Extreme is a marketing flourish or a turning point.