ARB Corporation Limited (ARB) - Pressing on

October 15, 2024

ARB Corporation engages in the design, manufacture, distribution, and sale of 4WD motor vehicle accessories and light metal engineering works. The company serves stockists, vehicle dealers, and various fleet operators, as well as owning the ARB store network. The company has operations in Australia, New Zealand, the US, Thailand, the Middle East, Europe, and the UK. ARB was incorporated in 1975 and is based in Kilsyth, Australia.

Australian new vehicle sales decreased 12.4% in September2024, with sales down 7.2% in 1Q25. The decline in sales reflects the cycling of record growth achieved in 2023 and a more subdued consumer spending environment.

Segment sales remain volatile - For ARB, new vehicle sales in its key segments, sports utility vehicles (SUVs) and light commercial vehicles (LCVs), both fell in September. More specifically, sales within ARB's key vehicle makes and models dropped 14.7% in the month. We note, however, that ARB's order book remains at high levels and sales have been constrained by staff shortages in its national network of stores in recent periods.

Investment view - We expect sales and earnings to continue to grow at above-average levels given the following: 1) continued growth in demand for 4WD accessories in 4WD markets; 2) further expansion of the ARB store network in Australia; and 3) further market penetration of ARB’s products into offshore markets, particularly the US.

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