06-Feb-2023: Market-Update.PDF

The Board of ARB Corporation Limited (“ARB” or the “Company”) provides the following update to the market for the half year ended 31 December 2022 (“1H FY2023”).

Based on preliminary, unaudited management accounts for 1H FY2023, the Company achieved:

• Sales revenue of $340.9 million, down 5.1% compared with the previous corresponding period. Pleasingly, the second quarter of 1H FY2023 (“2Q FY2023”) was slightly ahead of the same period last year, an improvement from the 10.0% decline in the first quarter reported at the 2022 AGM. Sales to the Australian Aftermarket achieved 2.7% growth during 1H FY2023, whilst sales to export markets and original equipment manufacturers were consistent with expectations at the 2022 AGM, down 8.8% and 36.9% respectively.
• Profit before tax within the range of $64.0 million to $64.6 million, a decline of 29.7% compared with the previous corresponding period. The profit result reflects the lower sales and the inflationary impact on the Company’s cost base in particular. Pleasingly, inflationary pressure on the Company’s cost base moderated throughout 2Q FY2023 with freight and steel costs retreating towards more historical levels. Furthermore, recent sales price increases will improve margins and recruitment opportunities appear to be improving despite continuing to be challenging.

The Company maintains a positive short-term outlook based on its continuing strong customer order book, which is in line with order levels throughout 2022. ARB is focused on supporting export markets and pursuing various market opportunities whilst managing input costs and global supply chain pressures.

The Board believes ARB remains well positioned to achieve long term success through:

• New product development with a number of new and innovative products to be released in 2H FY2023;
• Expansion of the Australian Aftermarket through new and upgraded retail stores and stockists; 
• Strategic partnerships with key Original Equipment customers in Australia and internationally;
• Increased distribution and manufacturing capacity to accommodate future growth; and
• A well-balanced management team with a blend of long-term ARB and experienced external executives.

ARB expects to release its results for 1H FY2023 and further commentary on Tuesday, 21 February 2023. The Company will host a webcast of the 1H FY2023 results at 10.00am on the same day, details for which will be provided via an ASX announcement one week prior. 

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Slightly down on the prior period, with OEM sales well down (-36.9%) which was partially offset by increased sales to the Australian aftermarket (retail sales through ARB stores throughout Australia).

PBT around $64m, a -29.7% decline on the pcp. Lower sales and higher costs were to blame, but costs ("inflationary pressures") moderated through the December quarter. They mention that both freight and steel costs have declined towards more historic (normal) levels. They also call out that they've managed to push through sales price increases recently and recruiting, while still challenging, is becoming easier (improved recruitment opportunities). Their NPD pipeline remains strong and they plan to roll out further ARB retail stores and upgrade others.

There's more detail in there, but those are the main takeaways from my POV, as an ARB shareholder. The market appeared to like this update this morning, with the share price up to as high as $34.02 (they closed yesterday at $33.40), but by the end of the day, they were slightly down for the day (-8 cents at $33.32, or -0.24%), pretty much in line with the ASX200 Index, which was down -0.25%, so they performed in line with the market today really. The All Ords closed down -0.33% as smaller companies seemed to perform a little bit worse than the top 200 companies did.

I see no real issues with this update. It means that there will be no surprises on the 21st when they announce their official audited results. I regard ARB as having one of the best management teams of ANY ASX-listed company. They would certainly be in my top 5, probably in my top 3. I rate their management very highly, based entirely on their track record over the years, including their record of superb capital management - where they either reinvest profits back into the business at very good rates of return or else they return excess funds to their shareholders. It helps that Andrew Brown (their MD) and Roger Brown (their Chairman) together hold just over 6% of the company, worth $164.5 million (based on today's closing share price), so they think like business owners, not just business managers. Plenty of skin in the game.

ARB 4x4 Accessories - Your partner in adventure

Disclosure: I hold ARB shares both here and in a number of my real life portfolios, including my SMSF.

28-Oct-2022: ARB Corporation 2022 AGM Presentation

See Also: ARB Corporation 2022 Annual Report

Like many companies at the moment, ARB have been sold down on their AGM Presentation today, finishing the day down $1 (or -3.57%) at $26.98. That's a fair way below their $50+/share highs during the second half of last year. Their share price has almost halved since then.

As usual, ARB's management have given conservative guidance, with continued growth forecast, albeit more weighted to the second half. I'm a holder of ARB shares, both IRL and here on SM, and they're one of the highest quality companies on the ASX in my opinion, with some of the best management also. The company's share price does tend to trend well, as that graph shows, so I'm planning to top up my positions once they eventually stop falling and then establish another uptrend.

ARB, which I hold, have reported this morning, and it's a good one.  ARB achieved a net profit after tax of $112.9 million for the year ended 30 June 2021, up 97.0% on the reported net profit after tax of $57.3 million in the previous year.  Sales for the year were $623.1 million, an increase of 33.9% over the previous year.  Profit before tax of $150.0 million for the year ended 30 June 2021 represents an increase of 92.1% compared with the year to 30 June 2020.

The Company intends to pay a final fully franked dividend of 39.0 cents per share.  This brings total dividends for the year to 68.0 cents per share fully franked, an increase of 72.2% compared with last year.

Covid-19 has clearly provided ARB with more tailwinds than headwinds, however I still rate this as an outstanding result, and I'm a happy ARB shareholder in 2 of my RL PFs (portfolios), and they're also in my SM PF.

14-July-2021:  ARB released this Market Update at 5:13pm AEST today, being after the market had closed.  I'm thinking they might pop a little tomorrow.

It went a little something like this...

The Board of ARB Corporation Limited (“ARB”) is pleased to provide an update to the market for the financial year ended 30 June 2021.

The Company advises that it achieved unaudited sales revenue of $623 million for the financial year ended 30 June 2021 which represents growth of 33.9% compared with the prior year. Based on preliminary, unaudited management accounts, the Company’s profit before tax for the financial year is within the range of $145 million to $150 million.

ARB expects to release its results for the financial year ended 30 June 2021 on Tuesday, 17 August 2021.

The Company maintains a positive short-term outlook based on its consistently strong customer order book. ARB is focused on managing input costs and global supply chain pressures whilst pursuing various market opportunities. The current pandemic and economic conditions remain very uncertain and it is not possible to provide financial or operational guidance beyond the short term.

The Board expresses its appreciation to customers and suppliers and recognises the commitment and efforts of ARB’s staff around the world.

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[I hold ARB shares in 2 of my real life portfolios, and they're also in my Strawman.com virtual portfolio.]

16-Feb-2021:  Letter to Shareholders   plus   Half Yearly Report and Accounts

I hold ARB shares in three out of four of my RL portfolios, and they are also on my Strawman.com scorecard.  My 4th RL PF (real life portfolio) is just a small 3-LIC PF that I manage for my two kids, so ARB are in all of my main PFs.  There is always a lot of expectation with a company as high quality as ARB who have the outstanding track record of total shareholder returns that they do.  And it would appear that as good as these numbers are (and they are good), the market expected even better, so they are being sold down.  The other possibility is that they are being sold down today based on the very conservative outlook statements and guidance that ARB have given today, but that should not really be the case.  ARB management have always been very conservative with guidance, preferring to underpromise and overdeliver, usually providing one or two guidance upgrades throughout the year.  MQG (Macquarie Group) have traditionally done the same.  If you do that for long enough however, I guess the market EXPECTS you to overdeliver on your guidance, because you always do.  Anyway, the numbers were good:

For the 6 months ended 31-Dec-2020, compared to the pcp (previous corresponding period, being the 6 months ended 31-Dec-2019):

• Sales revenue: $283.9m, up +21.6%
• Other revenue: $1.1m, up +47.8%
• Total revenue: $285m (pcp: $234.1m), up +21.7%
• Profit before Tax: $72.1m (pcp: $34.4m), up +109.6%
• Tax expense: ($18.1m), pcp: ($9.1m), up +98.8% 
• Profit after Tax: $54m (pcp: $25.3m), up +113.5%
• Earnings per Share (cents): 67.32cps (pcp: 31.71cps), up +112.3% 
• Interim Dividend (cents per share): 29cps (pcp: 18.5cps), up +56.8%
• Franking: 100% (same as pcp)

Not bad, eh!  Particularly in that COVID-19 period (last 6 months of CY2020 - calendar year 2020).  The most pleasing things to see, in my opinion, was that while revenue was up +21.7%, PBT was up by a much larger +109.6% and PAT was up by an even larger +113.5% (and EPS was up +112.3% on the pcp).  They managed to improve their profit margins as well as their revenue.  Obviously, the Australian Federal Government's "Jobkeeper" programme did have a positive impact on those numbers, and it's going to be interesting to see how that affects their numbers in 12 months' time.  

While many believe that companies like ARB were net beneficiaries of COVID-19, and that is probably correct, ARB did have plenty of challenges during the period, which they have outlined in their "Chairman's letter to shareholders" - 1st link at the top.

Here's the guidance they have given today:

THE FUTURE

The Company maintains a positive short-term outlook based on a strong customer order book and a return to growth in new car sales in Australia over the past few months.

The Company’s first half performance should not be used as an indicator for the second half of the financial year given continued uncertainty around COVID-19 related restrictions and trading conditions more generally and the inclusion of non-recurring government benefits received during the first half. The Board also remains cautious of uncertainty in the current global economic environment and cannot provide guidance on the full year outlook.

In the longer term, ARB remains positive with growth plans in place, both in Australia and in export markets, including new products and geographic expansion.

With strong brands around the world, very capable senior management and staff, a strong balance sheet and growth strategies in place, the Board believes ARB is well positioned to achieve on-going success.

The Board would like to thank all ARB staff worldwide for their efforts during the COVID-19 period under very stressful and challenging conditions.

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[I'm a happy holder of ARB shares, although I did trim a small portion of one of my ARB positions in one of my portfolios this morning to lock in just some of the +115% profit I was sitting on (average price paid was $17.93/ARB share).  I tend to do that reasonably often with these very high quality companies, buy and top-up at lower prices and trim high - when they're flying, like ARB have been lately.  As well as realising profits, it's about risk management and maintaining target weightings for each position within each PF.]

12-Jan-2021:  Another positive business/market update from ARB today

MARKET UPDATE

The Board of ARB Corporation Limited (ARB) is pleased to provide an update to the market for the half year ended 31 December 2020. This announcement follows the Company’s previous update released to Australian Securities Exchange on 7 October 2020 and the Chairman’s Outlook Statement presented at the Company’s Annual General Meeting on 15 October 2020.

The Company advises that it achieved unaudited sales revenue of $284 million for the half year ended 31 December 2020 which represents growth of 21.6% compared with the prior corresponding period. Based on preliminary, unaudited management accounts, the Company’s profit before tax for the first half is within the range of $70 million to $72 million, inclusive of $9.8 million of non-recurring government benefits.

ARB expects to release its results for the half year ended 31 December 2020 on Tuesday, 16 February 2021.

The Company maintains a positive short-term outlook based on a strong customer order book and another record sales month in December 2020. However, the Company’s first half performance should not be used as an indicator for the second half of the financial year, for which no guidance can be provided, as it remains far too uncertain to predict in the current economic climate.

The Board expresses its appreciation to and recognises the commitment and efforts of ARB’s staff around the world.

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[I hold ARB shares.  Great company.  Excellent Management who are conservative and never overpromise and underdeliver (they do the opposite regularly).  Plenty of insider ownership, hence positive alignment with ordinary shareholders.  Superb track record of total shareholder returns.  Excellent company culture.  This is as close to a "buy and hold" company as I can find, along with CSL.  Neither ARB or CSL look cheap, or even good value at current prices, but both will be trading significantly higher in 5 years and 10 years time (IMO) so they are both very solid "Holds" (IMO), and I do hold both, having bought back into CSL yesterday on a small pullback.]

15-Oct-2020:  Chairman's Address and Presentation to Shareholders

[I hold ARB shares.]

07-Oct-2020:  Market Update

In compliance with continuous disclosure requirements, this update is to advise that ARB Corporation Limited (ARB) achieved unaudited sales revenue growth of 17.7% for the first quarter to 30 September 2020 compared with the previous corresponding period. Based on preliminary, unaudited management accounts, ARB’s profit before tax for the quarter is $29.7 million, excluding non-recurring government benefits of $9.7 million related to the quarter.

Excellent growth was achieved in export markets, while domestic Australian sales growth was moderate and, as expected, OEM sales decreased compared with the same period last year. The extended lockdown in Melbourne had a negative impact on local sales during the quarter. The level of outstanding orders remains high and work is being done to overcome logistical difficulties and to increase production to reduce the order bank and better service customers.

The Board believes a substantial proportion of the recent growth can be attributed to satisfying pent up demand created during the lockdown period. In addition, an increased trend towards local touring in several countries has been helpful and government support has provided spending stimulus to people and businesses. In the absence of a significant change in the economic environment, export sales are expected to remain strong and the OEM order book is growing.

While the short to medium term outlook for the Company is positive, the future economic environment remains very uncertain and no guidance can be given for the remainder of the financial year. Furthermore, the Board of ARB does not believe that the Company’s first quarter performance should be used as an indicator of the likely full year result which remains far too uncertain to predict. As government and other COVID-19 related support reduces, the impact on economic activity will be monitored closely so that ARB can respond appropriately as required.

The next planned shareholder event is the Company’s virtual AGM on 15 October 2020.

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[I hold ARB shares.]

18-Aug-2020:  Appendix 4E and Annual Report   and   Letter to Shareholders   plus   Dividend Letter

A number of companies deferred their interim dividend payment date 6 months ago, and there is an expectation that a few of those companies might not pay a final dividend this year, perhaps hoping that the deferred interim dividend would provide a substitute for a final dividend.  However, ARB are going to pay both, on the same day, concurrently. As well as deferring their interim dividend payment date, ARB also deferred their interim dividend record date, so shareholders on the register on October 9th will receive both dividends (totalling 39.5 cents) on 23rd October.  ARB said today:

"The Board of ARB Corporation Limited (“ARB”) is pleased to announce that it has declared a fully franked final dividend of 21.0 cents per share (“Final Dividend”) for the financial year ended 30 June 2020. The Final Dividend of 21.0 cents per share will be paid concurrently with the fully franked interim dividend of 18.5 cents per share (“Interim Dividend”) on 23 October 2020. The Interim Dividend was declared on 18 February 2020 and scheduled for payment on 17 April 2020. However, as announced to Australian Securities Exchange on 30 March 2020, payment of the Interim Dividend was deferred as a prudent response to the impact of COVID-19. Shareholders will now receive both dividends, totalling 39.5 cents per share fully franked, on 23 October 2020."

As an ARB shareholder, I LIKE that.  Here are their full year results (headline numbers):

• Sales Revenue: $465,379,000 (FY19: $443,891,000) - Up +4.8%
• Revenues from ordinary activities: $466,988,000 (FY19: $446,572,000) - Up +4.6%
• Profit from ordinary activities before tax attributable to members: $78,092,000 (FY19: $77,692,000) - Up +0.5%
• Profit from ordinary activities after tax attributable to members: $57,295,000 (FY19: $57,137,000) - Up +0.3%
• Net profit for the period attributable to members: $57,295,000 (FY19: $57,137,000) - Up +0.3%
• Dividends:
  • Interim Dividend per Ordinary Share (fully franked): 18.5 cents (record date: 9 Oct 2020, payment date: 23 Oct 2020) (FY19 Interim Dividend: 18.5 cents)  +0.0%
  • Final Dividend per Ordinary Share (fully franked): 21.0 cents (record date: 9 Oct 2020, payment date: 23 Oct 2020) (FY19 Final Dividend: 21.0 cents)  +0.0%

--- click on links above for more ---

[I hold ARB shares.  They have superb founder-led management with aligned interests due to large shareholdings in the company they manage, and they managed to eke out a small increase in both revenue and earnings in a very tough year.  I consider ARB to be easily one of the top 10 best managed companies on the ASX, possibly in the top 5.]

30-Mar-2020:  Earnings Guidance and Deferral of Interim Dividend Payment

Regarding the dividend, they are not only deferring the payment until October (as a number of other companies already have) but ARB are also deferring the record date as well:

Interim dividend payment 
 
ARB is in a strong financial position with no net debt and is additionally supported with its immediately available bank facility. 
 
Notwithstanding the Company’s strong financial position and due to the uncertainty around when trading conditions will improve, the Board has prudently decided to defer payment of the interim fully franked dividend of 18.5 cents per share which was due to be paid on 17 April 2020 to 23 October 2020.  The record date has also been deferred from 3 April 2020 to 9 October 2020.

The Company is undertaking a number of other operational measures to protect its financial position whilst trading through the current challenging economic environment. The Board believes that ARB will be very well positioned to take advantage of the opportunities that are expected to arise when conditions improve.  

--- click on link above for more ---

Excerpt:

Earnings guidance 
 
The Board of ARB Corporation Limited (“ARB” or the “Company”) has decided to withdraw its earnings guidance provided on 18 February 2020 for the financial year ending 30 June 2020.   
 
Whilst trading during January, February and the first half of March 2020 was in line with the Company’s earnings guidance, it is not possible to reliably forecast where the current financial year will end due to the increasing levels of economic uncertainty as a result of Covid-19. 
 
The escalation of government protection levels and the enforcement of various levels of shutdown and business closures in Australia, Thailand, the United States, New Zealand, Europe and the Middle East are progressively slowing economies across our global business operations. 
 
ARB provides essential services to many critical industries around the world including emergency vehicle services, communication networks, aid agencies, government law and order, energy providers and health organisations.  The Company is working closely with its employees, customers and suppliers to manage disruptions to the business and ensure continuity when market conditions improve. 
 
ARB is focused on the health and safety of its staff and customers and has put in place appropriate measures to protect their well-being whilst ensuring the continuity of services to customers. 

--- click on link above for more ---

http://www.arb.com.au/latest/news-and-releases/

Letter to Shareholders - 22nd August 2018 - see here.

Market Update, 2nd May 2018 - see here.

Dividend History, showing special dividends in 2001, 2004, 2009 & 2014 - see here.

We're about due for another one in about a year or two I would guess.

http://www.facebook.com/pg/thearbshop/posts/

ARB Frontier Long Range Tank:

It's the FUEL tank - that the other tank is about to drive over...

http://www.arb.com.au/fuel-tanks-storage/frontier-long-range-fuel-tank/

ARB is the "bloke's stock".  They make and sell 4 wheel drive (4WD) vehicle accessories, including bull bars, roof and luggage racks, cargo barriers, canopies, spotlights, winches, camping gear for 4WDs, fridges/freezers; it's a long list.

They always look expensive, but they keep on growing, increasing their dividends every year, paying an additional special dividend about once every 5 years, finding new ways to grow, and avoiding debt like the plague - always maintaining a net cash position.  Even in a recession people will still spend money on their vehicles, and that goes double for 4WD enthusiasts.  ARB's chain of retail shops across Australia are all staffed by 4WD enthusiasts, which is why 4WD owners like to shop there.

ARB sells its products to distributors around the globe. The 4WD market is growing in many parts of the world and continues to provide strong growth potential for ARB.  Exports remain a key focus, attracting further investment in both infrastructure and marketing.  Export sales grew by a strong 14.7% in FY18 and now represent 28.0% of the Group’s sales. 

ARB has distribution centres in Australia, the USA, the Czech Republic, Thailand and in the United Arab Emirates.

Despite the demise of the car manufacturing industry here in Australia, sales to Original Equipment Manufacturers (OEMs) by ARB grew by 2.8% for the year and now represent 6.9% of the Group’s sales.  Some OEM projects were delayed in H2FY18 due to programme complications but those projects are planned to commence shortly.  Accordingly, the Company is confident of better OEM sales growth in the 2018/19 year. 

ARB regards product development as a key element in maintaining the Company’s long term competitive advantage. Research and development expenditure is continuing to increase in line with Company growth. During the year, more new vehicle releases have occurred both in Australia and overseas and new products for these vehicles are being released into the Company’s factories on a weekly basis.

ARB maintained a steady stream of new product releases throughout the year, most notably including the releases of LINX, ARB Tailgate Assist, the ARB hydraulic JACK and Summit Raw Rear Bars for utilities.

Work is also continuing on a number of long term development projects that will provide growth opportunities for the Company in the future. To get a better idea of ARB’s new product releases, the Company’s website at www.arb.com.au is a great source of information.

05-Mar-2020:  Letter to Shareholders

20-Aug-2019:  ARB have reported this morning, and they have released 6 announcements.  The main two are:

Appendix 4E and Annual Report

Letter to Shareholders

Disclosure:  I hold ARB shares.

18-Feb-2020:  Half Yearly Report and Accounts

No surprises.  Revenue around 7% up, NPAT around 7% down (partly due to the significant strengthening of the Thai baht which has caused an increase in the company’s costs on a range of products manufactured in ARB’s Thai factories), NTA slightly up (+3.3%), interim dividend maintained (@ 18.5 cps).  I hold ARB.  Very high quality management team with significant insider ownership.  Good long term hold.

01-Nov-2019:  Ford News Release

ARB have been working with OEMs (Original Equipment Manufacturers, i.e. vehicle manufacturers) for years, and this is just one example of such collaborations - between Ford USA and ARB to produce a range of functional accessories for the Ford Ranger in this case.

ARB don't generally announce these deals individually to the ASX, but Ford released their own announcement, so ARB released it here with a covering note.

While sales to OEMs isn't ARB's most profitable revenue stream - they generally make a higher profit margin via sales direct to end-users of these vehicles - the collaboration with OEMs is still a very important part of ARB's business model, where ARB work with the vehicle's manufacturers to develop exactly the right gear that works perfectly with those vehicles and can be fitted with the blessing of the vehicle manufacturer.  If car buyers want to get their vehicles accessorised when they originally purchase the vehicle (via the dealer), they get ARB gear, and if they choose to accessorise later, they know that ARB gear will fit and will work.  It provides ARB with a clear competitive advantage over their competitors.  It forms an important part of my investment thesis for ARB, and I'm always happy when one of these OEMs makes an announcement of their own (such as Ford has done in this case) where they are clearly looking to leverage off the excellent reputation that ARB has in the 4WD marketplace.

Disclosure:  I hold ARB shares.

20-Apr-19:  Firstly, let's have a look at the limitations (and pitfalls) of TA:

Technicals: June 05 2018: ARB Looking Bullish

That article, by Michael Gable of Fairmont Equities, published on FNArena.com in early June last year, suggested that the rise in the ARB SP at that time was sustainable, based on technical indicators.  MG was right, for the following 2 weeks.  Then ARB peaked at $23.50 on June 21st, and proceeded to spend the next six months falling, bottoming at $14.88 (some 37% lower) on January 21st (3 month's ago).  

ARB Chart  That may default to a 6-month chart.  Click on "12 Months" to see what I'm talking about.

Since then, the ARB share price has been rising nicely, closing on Thursday at $17.79.  Once again, that rise looks sustainable, but...  one bad report (fundamentals) will cause them to turn on a dime.  TA that ignores fundamental analysis is seriously flawed.  That said, Michael Gable combines both fundamental and technical analysis, and he still got that ARB call wrong back in June last year.  

Based on their 12-month chart and their past ability to trend very well for many months in a row (like 6 months heading south east during the second half of last year, and 4 months of north east trajectory so far this year), it looks like a good time to jump back into ARB.   They are still growing and they have superb management who are focussed on shareholder returns, a rock-solid balance sheet, and an excellent industry reputation.

Letter to Shareholders, by Roger Brown, ARB Chairman, 27 Feb 2019

In 2008 the SUV segment accounted for 19.2% of all new car sales in Australia – now it’s 43%. There’s been a significant shift in buyer tastes as SUVs and dual-cab utes become the dominant force, while passenger car sales slump to less than one third of the overall market for the first time (source:  http://www.motoring.com.au/australian-new-car-sales-drop-in-2018-116332/  January 4th 2019).

ARB is named after the initials of its founder Anthony (Tony) Ronald Brown.  His brother Andrew Brown is ARB's current MD, and owns almost 7.9m shares.  Their other brother, Roger Brown, is ARB's current Chairman, and also owns 7.9m ARB shares.  Here's a little history:

http://www.whichcar.com.au/gear/arb-history-and-timeline

http://www.arb.com.au/about/

http://www.arb.com.au/about/investor-relations/

Disclosure:  I often hold ARB shares, and I do currently hold some.  They are a good longer term holding.  They pay regular dividends - which are a little bigger every year, and they also have a history of paying larger special dividends about once every five years.  ARB Dividend History

They are about due to pay another one - their last big special dividend was in 2014.

Of course, past performance and history is not a reliable indicator of future performance - or dividend payment intentions.