RPM Faces Margin Pressure but Eyes Growth in Tyre Recycling

Steady Financial Performance Amid Industry Challenges

RPM Automotive Group Ltd (ASX, RPM) delivered a resilient financial performance for the fiscal year ending 2025, navigating a complex automotive aftermarket environment with a strategic focus on margin improvement and operational efficiency. While reported revenue fell 5.2% to $112.1 million excluding discontinued operations, the company’s like-for-like revenue actually grew by 1.5%, signaling underlying business stability.

Gross profit held steady at $40.4 million, but RPM achieved a notable gross margin increase to 36.0% from 34.1% the previous year, reflecting a favorable sales mix and pricing discipline. This margin expansion underpinned a 3.9% rise in EBITDA to $13.0 million, lifting the EBITDA margin to 11.6%, the highest recorded to date for the group.

Strategic Growth and Operational Leverage

RPM’s management highlighted the benefits of their national footprint and cross-selling capabilities across diverse automotive segments including wheels, tyres, accessories, and motorsport safety gear. The company continues to pursue bolt-on acquisitions to complement organic growth, aiming to consolidate a highly fragmented market and capture greater wallet share from fleet and commercial customers.

Despite a 7.6% decline in net profit before tax to $5.6 million, primarily due to increased finance charges and depreciation, RPM remains comfortably within banking covenants with moderate net debt of $27 million. The company’s balance sheet shows improved cash position and disciplined working capital management, supporting ongoing investment in growth initiatives.

Tyre Recycling, A Forward-Looking Environmental Play

A standout element of RPM’s FY25 update is the progress on its tyre recycling facility, which is currently processing over 180 tonnes of end-of-life tyres per week, with capacity to scale beyond 300 tonnes. This initiative leverages RPM’s existing distribution platform and reverse logistics expertise to address Australia’s significant tyre waste challenge, estimated at over 560,000 tonnes annually.

The company plans to establish additional recycling plants across major Australian hubs, positioning itself as a leader in sustainable automotive solutions. This forward integration not only captures incremental margin but also aligns with growing environmental and regulatory pressures in the industry.

Outlook, Focus on Organic Growth and Capital Discipline

Looking ahead to FY26, RPM is targeting revenue and EBITDA growth driven by organic expansion and improved divisional profitability. The board is also considering divestment of non-core assets to sharpen focus and enhance cash flow generation. Capital management will remain a priority, with an emphasis on reducing gearing and funding growth from internally generated cash.

RPM’s strategic vision to become a market leader in auto services is underpinned by investments in national network scaling, product range expansion, and customer experience enhancements. The company’s upcoming AGM in November will provide further updates on progress against these goals.