How Is ARB Turning a Profit Dip into US Market Momentum?

Challenging Market Conditions

ARB Corporation Limited has reported a modest decline in sales revenue for the half year ended 31 December 2025, with total sales dipping 1.0% to $358 million compared to the prior corresponding period. Profit before tax fell more sharply by 18.8% to $57.1 million, while net profit after tax decreased 17.2% to $42.2 million. These results reflect a combination of external pressures including a stronger Thai baht, which increased manufacturing costs, and softer demand in the Australian aftermarket segment.

The company’s underlying profit, which excludes one-off items such as property sales gains and transaction costs, also declined by 14.4%, underscoring the impact of ongoing currency headwinds and reduced factory overhead recoveries.

Domestic Market Dynamics

Sales to the Australian aftermarket fell by 1.7%, influenced by lower new vehicle sales of key 4x4 models and persistent accessory fitment resource shortages. Notably, sales declined across most states except Western Australia, although the order book ended the period 5% higher than a year ago, suggesting resilient underlying demand. The company also noted flat deliveries of core vehicles and mixed performance across models, with the LandCruiser Prado showing a strong 67% increase due to prior year model changeover effects.

ARB continued to expand its retail footprint domestically, opening five new flagship stores across New South Wales, Victoria, and Western Australia, while relocating and upgrading others. The company also launched a direct-to-consumer e-commerce platform in February 2026, designed to complement its omni-channel strategy and support its network of nearly 80 stores nationwide.

Export Growth and US Expansion

Export sales rose 8.8%, driven primarily by a 26.1% surge in the United States. This growth is attributed to ARB’s strategic partnership with Toyota US, the success of its US e-commerce platform launched last year, and the expanding wholesale channel through its associate Off Road Warehouse (ORW) and the 4 Wheel Parts (4WP) retail network. The combined ORW/4WP network now operates 48 stores and is generating steady profits, with plans to roll out a store-in-store program to further accelerate growth.

To support this expansion, ARB committed to a new 8,100 square metre facility in Norco, California, which will consolidate distribution and engineering operations, and facilitate integration with 4WP. While other export regions faced some challenges due to vehicle supply delays and regional disruptions, the company remains optimistic about its global growth prospects.

OEM Sales and Financial Position

Sales to original equipment manufacturers (OEM) declined sharply by 38.2%, reflecting elevated inventory levels from the prior period and weaker new vehicle sales. Despite this, ARB expects OEM sales to improve modestly in the second half of FY2026.

Financially, ARB maintains a robust balance sheet with $59.4 million in cash and no debt as of 31 December 2025. Operating cash flow improved significantly to $63.9 million, supported by inventory management. Capital expenditure of $11.7 million was invested in building developments and manufacturing equipment to support future growth.

Looking Ahead

ARB’s management remains confident in the company’s long-term growth trajectory, underpinned by ongoing product development, expanding distribution channels, and strong momentum in the US market. The company anticipates sales margins in the second half of FY2026 to stabilise, aided by favourable currency hedging and consistent factory overhead recoveries. While challenges persist in the Australian aftermarket and OEM segments, ARB expects improved financial performance in the coming months, driven by new vehicle launches and continued export growth.