ARB Corporation (ASX:ARB)

Roger Brown
Exec Chairman
Market Cap (AUD): 1.5B
Sector: Consumer Discretionary
Last Trade (AUD): 18.71 -0.07 (-0.37%)
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1. About

ARB Corporation Ltd is an Australia-based company, which is engaged in the design, manufacture, distribution, sale of motor vehicle accessories and light metal engineering works. ARB is Australia’s largest manufacturer and distributor of 4×4 accessories. The Company has a vast international presence, with an office in the USA and an export network that extends through more than 100 countries around the globe.

2. Business model

 

The Company operates the following divisions:[1]

 

Division

Revenue ($’000)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

Australia

 

$344,797

80.9%

 N/A

Sales for the year were $424 M, an increase of 11.7% over sales of $380 M in the pcp. Stock availability was a critical factor in achieving improved sales growth. It is pleasing to report that stock levels rose by only $3 M in the past six months as adequate stock levels were reached to maintain growth. Export sales grew by a strong 14.7% and now represent 28.0% of the Group’s sales

USA

$56,682

13.3%

N/A

Thailand

$5,564

1.3%

N/A

Middle East & Europe

$19,401

4.5%

N/A

Eliminations

N/A

N/A

N/A

3. Strategy

 

Key strategies include:[3]

 

  • Demand for the Company’s products currently remains healthy in many countries around the world. ARB has long-term growth plans in place, both in Australia and in export markets, which include new products and improved distribution
  • With strong brands around the world, capable senior management and staff, a strong balance sheet and growth strategies in place, the Board believes ARB is well positioned to achieve ongoing success

4. Markets

 

The Company operates in markets including:[4]

 

Industry (Australia)

Industry Revenue (2017)

Growth Rate (Annual 13-18)

Motor Vehicle New Parts Wholesaling

$8 billion

(9.0%)

Motor Vehicle Parts and Accessories Manufacturing

$3 billion

 (10.4%)

5. Competition

 

Major competitors include:[5]

 

  • Toyota Motor Corporation (TYO:7203)
  • AMA Group Limited (ASX:AMA)
  • Maxitrans Industries Limited (ASX:MXI)

6. History

 

1975[6]

ARB Corporation was formed

 

1987

Listed on the ASX

 

2003

ARB acquired Kingsley Enterprises

 

2014

ARB reached 50 stores across Australia

 

2015

ASX code changed from ARP to ARB

 

2016

The Frontier long-range polymer fuel tank is launched

 

2018

ARB launched latest recovery accessory[7]

ARB introduced Linx - ‘The Next Generation of 4*4 accessories

7. Team

 

Board of Directors[8]

 

Roger G Brown – Executive Chairman, Non-executive Director

Andrew H Brown – Managing Director

Mr. Adrian R Fitzpatrick – Independent Non-executive Director

John R Forsyth – Executive Director, Company Secretary

Robert D Fraser, B.Ec., LLB (Hons) – Independent Non - Executive Director

Andrew P Stott – Independent Non - Executive Director


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8. Financials

 

2018 Half Year Results Presentation

 

Financial Year 2018 (ended 30 June):[9]

 

Division

Revenue ($’000)

% Change

Profit (before Tax) ($’000)

% Change

Australia

$344,797

11.0%

N/A

N/A

USA

$56,682

12.3%

    N/A

N/A

Thailand

$5,564

16.0%

N/A

N/A

Middle East & Europe

$19,401

26.8%

N/A

N/A

Eliminations

N/A

N/A

N/A

N/A

Total

$426,444

11.9%

$74,372

10.2%

9. Risk

 

Major risks include:[10]

 

Currency Risk

Derivative financial instruments are used by the Group to hedge exposure to exchange rate risk associated with foreign currency transactions. Transactions for hedging purposes are undertaken without the use of collateral as the Group only deals with reputable institutions with sound financial positions.

The Group enters into forward exchange contracts to buy and sell specified amounts of foreign currencies in the future at stipulated exchange rates. The objective in entering the forward exchange contracts is to protect the consolidated entity against unfavourable exchange rate movements for both the contracted and anticipated future sales and purchases undertaken in foreign currencies.

 

Interest rate risk

The Group monitors its cash flow on a daily basis. Borrowings as at the year ended 30 June 2018 were $4.0m (2017: $nil).

 

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in the Consolidated Statement of Financial Position and Notes to the Financial Statements.

Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations. The credit risk exposure to forward exchange contracts is the net fair value of these contracts.

The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity.

 

Liquidity risk

The Group monitors its cash flow on a daily basis to ensure it can meet its obligations associated with financial liabilities.