ARB Corporation profits hits $54m amid 4WD accessories sales surge

Four-wheel drive accessories supplier ARB has doubled its profit to over $50m thanks to a spike in the popularity of outdoor recreation.

ARB Corporation chairman Roger Brown said the company benefited from a renewed demand for COVID safe outdoor activities.

4WD accessories retailer and manufacturer ARB Corporation has more than doubled its first-half profit and boosted its dividend after “pent-up” demand for outdoor recreation translated to higher sales in Australia and overseas.

The company’s net profit after tax was $54m, up 113.5 per cent on the $25.29m achieved during the previous comparable period.

Sales revenue increased 21.6 per cent to $283.9m while a fully-franked interim dividend of 29c per share was declared, up 56.8 per cent on last year‘s interim distribution.

ARB chairman Roger Brown said the company benefited from a renewed demand for COVID-19 safe outdoor activities.

Selling items such as these ARB accessories for Mitsubishi Challenger helped the company record a spike in profit.

“The recovery can be attributed to satisfying pent up demand created during the early lockdown periods, an increased trend towards local touring in many countries and the impact of governments’ financial stimulus on consumer demand and confidence,” he said.

Mr Brown also said that despite the strong profit, the interim dividend payout ratio was settled at 43 per cent, well below the average of 53-58 per cent, in order to strengthen the balance sheet and fund future investment.

“ARB’s investment includes significant research and development, store expansion, major capital expenditure and new manufacturing equipment, all of which are vitally important to increasing manufacturing capacity, facilitating export growth and supporting employment in Australia,” Mr Brown said.

Export sales growth was strong for the period, lifting by 36.7 per cent to account for just under 35 per cent of all sales.

“Growth was achieved from all export sales and distribution operations in Australia, the USA, the Czech Republic, the UAE, Thailand and New Zealand,” Mr Brown said.

Sales to original equipment manufacturers increased by more than 22 per cent to boost the segment’s contribution to 7.2 per cent of all sales, despite a sluggish new car market.

“The increase was achieved despite continued declines in the number of new vehicles sold and is attributable to new contracts with original equipment customers which are expected to continue through 2021,” Mr Brown said.

Australian aftermarket sales grew by 14 per cent and represent 58.1 per cent of all sales.

“Sales growth was above average in New South Wales, Queensland, Western Australia and Tasmania, slightly below average in South Australia and relatively flat in Victoria which was impacted by a prolonged COVID-19 related shutdown during the first half of the financial year,” Mr Brown said.

ARB’s earnings was also assisted by cost containment, efficiencies and advantageous currency movements. A JobKeeper subsidy of $9.8m was also received during the period and three more stores were opened, bringing the total number of retail outlets to 69.

Mr Brown said he had a positive outlook based on the customer order book but did not give specific full-year guidance due to the continuing uncertainty of the pandemic.

“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,” he said.

“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.”

Shares in ARB Corporation closed down $1.30, or 3.3 per cent, at $37.81.