ARB (ASX:ARB) executives said a challenging global auto backdrop and currency-driven margin pressure weighed on first-half results, even as the company delivered strong growth in the U.S. and continued investing in new stores, e-commerce and product development.
Financial performance and margins
Chief Financial Officer Damon Page reported sales revenue of AUD 358 million for the six months ended 31 December 2025, down 1% year over year. Reported profit before tax was AUD 57.1 million, down 18.8%. After adjusting for one-off items, Page said profit before tax declined 16.3%.
Management attributed most of the profitability decline to lower gross margins. Page said the combination of a AUD 3.7 million decline in revenue and a AUD 6.9 million increase in materials and consumables used reduced gross profit by AUD 10.6 million and accounted for “most” of the AUD 11.3 million decline in underlying profit before tax.
Channel results: U.S. strength offsets softer domestic and OEM demand
By channel, ARB said the Australian aftermarket declined 1.7%, affected by lower new vehicle sales for core platforms and an “ongoing shortage of accessory fitment resources.” Sales were marginally down in all states except Western Australia. The domestic aftermarket represented 56.9% of total sales, and the company ended the half with an open order book 5% higher than December 2024.
Export sales increased 8.8% and were described as the “standout” contributor. Sales into the U.S. grew 26.1%, which management linked to the strategic relationship with Toyota USA, the company’s U.S. e-commerce channel, and growth through the Off Road Warehouse (ORW) and 4 Wheel Parts retail networks. Chief Executive Officer Lachlan McCann later said ARB USA represents 43% of total export sales.
Original equipment manufacturer (OEM) sales fell 38.2% (a decline of AUD 11.2 million), which management attributed to higher inventories held by OEM customers amid lower new vehicle sales and slower inventory sell-through. McCann said the decline did not reflect a loss of any OEM contracts and noted that the prior corresponding period included deliveries of Toyota genuine Prado bull bars as that model ramped up.
Key cost drivers: Thai baht and factory overhead recoveries
Page said two factors drove the gross margin decline:
- Foreign exchange: ARB manufactures most fabricated products in Thailand, with costs denominated in Thai baht. Page said the baht traded at a historically strong range of 21–21.5 to the Australian dollar through calendar 2025. Using a three-month lag, ARB’s average rate was 21.17 baht per AUD in the first half of FY2026, versus 23.71 in the prior comparable period, representing an 11% drop in the Australian dollar’s purchasing power versus the baht.
- Lower factory overhead recoveries: ARB benefited from an “over-recovery” of factory costs in the prior period as inventory levels increased from AUD 240 million to AUD 278 million. Inventory was reduced in the second half of FY2025 and again in the first half of FY2026, which lowered overhead recoveries and reduced profitability.
Looking ahead, Page said ARB has “largely hedged” Thai baht exposure for the second half of FY2026 at rates slightly more favorable than those contracted in the prior corresponding period, and forecast overhead recoveries to be consistent with the second half of FY2025. He said second-half sales margins are expected to be broadly in line with the second half of FY2025.
In Q&A, Page also said ARB implemented an average price increase of about 3% in February, with benefits expected to flow through later in the half (late April through June) due to order book timing.
Cash flow, balance sheet, and dividend
ARB generated cash from operating activities of AUD 63.9 million during the half. The company invested AUD 11.7 million in property, plant and equipment, including AUD 5.2 million on land and buildings and AUD 6.5 million on factory, plant and equipment.
Page said ARB paid AUD 59.3 million in two dividends during the period, net of dividend reinvestments: a AUD 0.35 final dividend for FY2025 (cash outflow AUD 24.2 million) and a AUD 0.50 special dividend (cash outflow AUD 35.1 million). Both were fully franked at 30%.
The company ended the half with AUD 59.4 million in cash and no debt, down AUD 9.8 million from 30 June 2025 due to the special dividend. The board declared an interim fully franked dividend of AUD 0.34 per share (payout ratio 67.2%), payable 17 April 2026, with the dividend reinvestment plan and bonus share plan operating at a 2% discount.
Operational updates: stores, e-commerce, U.S. retail integration, and product pipeline
McCann said ARB’s retail store network grew to 79 stores from 75 a year ago. In the half, five new stores were opened (Mittagong and Griffith in New South Wales; Mildura in Victoria; Rockingham and Midland in Western Australia), while the Burnie, Tasmania store was sold but continues to trade as a private stockist. McCann highlighted planned developments including ARB’s largest footprint store in Townsville and a new corporate site in metro Sydney during FY2026, plus additional openings and flagship upgrades in FY2027.
ARB also launched its Australian e-commerce site “as of last week,” with McCann saying the business traded “seamlessly” through the first weekend and that orders and quotes were strong. He said the project involved investment in tools such as an e-catalogue to provide guaranteed fitment and integration with the independent store network.
In the U.S., McCann recapped ORW’s acquisition of 4 Wheel Parts (completed 18 October 2024 for a provisional $30 million, later adjusted down $4 million for excess and obsolete inventory). He said the combined network now totals 48 stores after closing five locations, and that the business transitioned ERP systems, restructured an e-commerce operation “back to profitability,” and delivered a net profit before tax shift of $3.5 million from the second half of 2025. McCann said ORW repaid ARB’s debt facility in full, and that on a like-for-like store basis, ARB product sales through ORW/4 Wheel Parts were growing at over 100% year over year.
McCann also announced ARB has leased an 8,100 square meter facility in Norco, California to support future growth and said the Seattle distribution center will be closed, while retaining a core team in Seattle.
On products, McCann said ARB’s newly developed winch has seen demand exceed initial forecasts, with first shipments expected to reach customers in March 2026. He also cited strong early accessory attachment for the Ford Ranger Super Duty platform and said ARB’s offerings for the facelift Toyota Hilux were in production with deliveries to customer back orders “imminent.”
In its outlook, management said second-half performance is expected to improve relative to the first half of FY2026 and trade closer to the prior corresponding period, supported by hedging actions, pricing, a strong order book, and continued growth opportunities in the U.S. and other export markets.
About ARB (ASX:ARB)
ARB Corporation Limited engages in the design, manufacture, distribution, and sale of motor vehicle accessories and light metal engineering works. The company provides bull bars, side rails and steps, canopies, UTE lids and tub accessories, roof racks, cross bars and carriers, suspension systems, driving lights, air compressors and tire accessories, air lockers, winches, recovery equipment and points, under vehicle protection products, fuel tanks and storage, drawers and cargo solutions, slide kitchen, portable fridge freezers, tents, swags and awnings, camping and touring accessories, safari snorkels, dual battery and solar systems, interior protection, and general accessories, as well as rear protection, towing, and wheel carriers.
