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ARB Corporation’s strategic acquisitions and market expansion fuel 12.6% profit increase

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By Colin Hay - 
ARB Corporation ASX automative parts industrials half-yearly report

Despite being impacted by industrial disputes and a drop-off in some international markets, ARB Corporation (ASX: ARB) has reported strong profit growth for the half year ended 31 December 2023.

The motor vehicle accessories specialist achieved a profit before tax of $72.5 million, up 12.6% over the previous corresponding period.

That amount was achieved after excluding a one-off capital expense of $1.7m relating to the final estimated disbursement for its acquisition of the Truckman business.

Profit after tax excluding the Truckman adjustment was $52.9m, up 12.3% compared with the previous corresponding period.

Reported profit for 1H FY2024 was up 9.5% to $70.8m before tax and 8.1% to $51.3m after tax.

During the half year, the company received sales revenue of $341.5m, up 0.2% compared with the previous corresponding period.

Despite its aftermarket sales being significantly hindered during the second quarter by industrial disputes across Australian ports, the company grew that area of its business by 3.7% in 1H FY2024, with growth achieved in all Australian states.

ARB has agreed to pay out an interim dividend of $0.34 per share, fully franked at a 30% tax rate.

The interim dividend will be paid on 19 April 2024 and the record date will be 5 April 2024.

New initiatives

In a letter to shareholders, chair Robert Fraser said the company continues to implement initiatives to improve its fitting capacity and alleviate constraints which continued throughout the half year.

“Pleasingly, current customer orders remain strong and new vehicle sales in Australia have returned to growth with the Ford Ranger, Toyota Hilux and Isuzu D-Max being the three highest selling vehicles in Australia in 2023,” he said.

However, while ARB achieved strong sales growth in the UK, results were not so strong overall internationally with export sales falling by 13.6% due to challenging market dynamics in other key overseas markets.

Truckman a UK positive

A strong point globally was the success of the UK-based Truckman business, which achieved strong sales and profit growth as new vehicle supply returned to that market after two years of subdued conditions.

Mr Fraser said that ARB continues to focus on recovering sales lost after major US customer 4 Wheel Parts was acquired by a third party that subsequently divested a majority of its retail store network.

“ARB continues to implement a number of longer-term initiatives to engage more directly with consumers and support sales in the USA via the establishment of the US e-comm site, its investment in Off Road Warehouse and the construction of a pilot ARB branded retail store in Seattle, Washington expected to open in Q4 CY2024,” he told shareholders.

Future looking positive

ARB’s sales to original equipment manufacturers (OEMs) increased by 53.8% over the period and results for 2H FY2024 and into FY2025 are projected to continue to grow.

The company is also forecasting that the resolution of Australian port disruptions and management initiatives will contribute positively to ARB’s accessory fitting capacity.

“The company maintains a positive outlook despite continued uncertain economic conditions, particularly in the global environment,” Mr Fraser said.

“ARB has a strong customer order book, strengthening partnerships and opportunities with OEMs and new and innovative products to be released to market during 2024.”

“The board believes ARB is well-positioned to achieve ongoing long-term success in Australia and internationally with strong brands around the world, loyal customers, very capable senior management and staff, a strong balance sheet and growth strategies in place.”