The Shark that got away

FY26 result (12 months ended 30 June 2026). Reporting currency: A$

FY26 was a tough year for ARB sales. The ‘why’ can be best captured in this chart.

Key Ford and Toyota models saw Australian vehicle sales declines almost across the board. What was working in that market, the BYD Shark, isn’t yet translating for ARB.

But margin and the U.S. were both highlights in the period.

Some of the margin tailwinds are external (ex FX) and management cautioned about extrapolating the 2H, but still a good outcome.

The latest U.S. strategy, which has been a work in progress for years and recently seen a big reset in strategy, is showing some promise. Americas sales were +10% on the year (albeit weaker 2H) while the U.S. brick & mortar business (the 4 Wheel Parts acquisition) swung to a profit and is seeing good ARB product sell-through post the store-in-store refits.

If you haven’t been to any of the redone 4 Wheel Parts stores (the ones featuring the new ARB displays) let me know - I have walked two in California and they look great - I have pictures and more granular feedback.

That said on the U.S. business, the 4 Wheel Parts network skews metro, and the question is if that network can capture the serious off-roader who wants to spend serious money on high end off-road products (which is where ARB’s brand sits).

ARB sell-through is up double digits - unsurprising when you now control the store, and especially given how good the store-in-stores look - but my industry feedback suggests repositioning that store brand to resonate with the serious off-roader will take work.

No mention of the Earth Camper this result. Having watched prospective customers gush over it at an industry event had gotten me optimistic for its prospects, but the radio silence in investor materials typically isn’t a positive.

Early positive Poison Spyder comments are very interesting. That is a crowded and competitive category and that brand has been missing in action for a while, so management talking to early traction is surprising to me but certainly good to hear.

I’m far closer to the North American market (where I’ve mostly been residing) and I fully acknowledge Australia is the move-the-dial market for ARB. But if you want to talk the U.S. then get in touch.

ARB issued no numeric earnings guidance for FY2027, in-line with usual practice. Although some directional commentary was provided, detailed below.

Original Equipment. “Sales to OEMs are expected to improve in FY27 following a temporary decline, subject to OEM supply chains and future platform release timing.”

Toyota has announced materially improved supply on core OEM models in the second half of calendar 2026 (1H FY2027).

"Lower new vehicle deliveries in 2H FY25 impacted the reported sales to OEM with increased new vehicle deliveries expected for 1H FY27". ARB "has recently secured contracts for 2 future platforms with new U.S. OEM customers, which we anticipate will include ARB branding", on "a 2- to 4-year development cycle", one of them for an electric platform.

Management is unambiguous on the nature of the FY2026 decline: "this decline was cyclical, driven by a lull between major vehicle programs and constrained supply of vehicles rather than any change in ARB's competitive position. We have not lost any OEM contracts by customer or by product segment."

Exports. “ARB’s Export business continues to trend positively, with UK registrations expected to recover and Europe performing well, although the Middle East remains impacted by regional conflict.”

On the US: "The US outlook remains positive, with the strategic foundations laid in prior years continuing to materialise into sustainable growth."

On the rest: "Growth in South-East Asia is expected to continue, while the newly established presences in China and South Africa position ARB for growth in these markets over the coming years."

The UK recovery carries a date — "conditions are anticipated to improve later in the calendar year as tax-friendly EV and hybrid models arrive, including Chinese models that Truckman has been successful and awarded canopy contracts for".

Australian Aftermarket. The FY2027 backdrop rests on vehicle supply: "improving supply of key 4x4 vehicles in Australia, including the reintroduction of the Toyota LandCruiser 70 Series", plus improved availability of HiLux, Prado and LandCruiser 300 Series.

The two platforms that hurt most in FY2026 — Toyota Prado (down 10%) and Toyota LandCruiser 70 Series (down 38%), "both of which are expected to recover in H1 FY2027".

"Looking forward, we expect FY 2027 new vehicle sales to be broadly in line with FY 2026, although with the improved status of Toyota vehicle supply, we expect the mix to be favorable."

Mix carries the weight on ARB's own framing — "the average Land Cruiser 300 series customer spends around twice as much on ARB accessories as the average Mitsubishi Triton customer."

South Africa — direct in-market wholesale operation. Wholly owned subsidiary registered, with its own warehouse and distribution facility. Operational “in the early part of FY 2027”. Intent: “increase product availability, use pricing to drive volume and build an even stronger brand targeting a step change in our African sales”. Investment quantum not disclosed.

Margins. “We would expect the margins to trade in line at this stage with the average of 2026 across the full financial year” — the full-year average, not the stronger second half. Swing factors named: the Thai baht (hedged to November 2026 at around THB 23), the Middle East conflict, steel prices and labour costs.

Order book. "The daily order intake and order book remain strong, continuing to display resilience in a tough market by maintaining similar levels as FY2025."

Engineering investment: “we are increasing our engineering investment by 10% to 15% per year, which will deliver a higher cadence of all new products as well as increased pace and scope of new vehicle applications.”

Marketing and manufacturing spend: "We do note that the marketing spend was down year-on-year, but that's not a position we'll hold going forward... we do expect and have forecast for an uplift in marketing spend in the new financial year" (FY2026 advertising expense was $10.8m, down 4.6%) — and "allowances for additional investments in manufacturing where needed with more product coming through".

Store network: three additional ARB stores (one Company owned) and five flagship upgrades in FY2027, against a reiterated “3 to 5 stores per year”. The next three years of store development and pipeline described as "reasonably mature" and "a long list of independent store owners wanting to invest in future and further stores". A “new preferred partner program” was named but not defined (detail deferred to AGM).

Silent on prior underlying PBT margin target of 20%: discussed at the 1H FY2026 presentation, not repeated at this result, and neither reaffirmed, updated nor withdrawn.

ARB gave no numeric FY2026 guidance; the benchmark is the 24 February 2026 statement. It was met on profit and beaten on margin with the second-half materials cost ratio landing 4.2 points better than guided.

Sales revenue. The decline steepened as the year ran, on lower Australian new vehicle sales and constrained consumer discretionary spending, and the stronger second-half dollar cutting the translation of export sales. New vehicle sales of the Ford Ranger and Toyota HiLux both fell 4%, the Toyota Prado 10% and the LandCruiser 70 Series 38%.

Materials and consumables used. The halves invert between the years — the AUD vs Thai baht sat at historical lows in the first half and recovered in the second. Two price increases were processed: a little over 2% from August 2025, worth about nine months of the year, and between 3.5% and 4% from April 2026, worth about three. Management puts the outcome “at the upper end of margins achieved over the last 5 or 6 years or so”.

Employee expenses. Up 1.9%, absorbing a circa 3.5% wage adjustment processed in October 2025, partly offset by a reduction in the use of contractors in manufacturing. The half shape follows that timing — down 0.3% in the first half, up 4.2% in the second.

Depreciation and amortisation. Up 9.8% to $35.7m, reflecting the recent expanded capital expenditure program, particularly in property and manufacturing.

Other expenses. Up 3.5% for the year on the audited comparative (up 6.3% against the reclassified comparative in the results presentation), on IT protection software, compliance costs including sustainability reporting and fleet fuel costs, with the Middle East conflict affecting sales volumes, timing of deliveries, fuel prices and distribution expenses. A $2,188k goodwill write-off on termination of the Thule distribution rights was taken in the first half and reversed in the second.

Effective tax rate. Down to 24.9% on profits weighted to Thailand. The second half at 23.7% is the lowest half-year rate in the window.

Underlying earnings. Down 7.5% to $89.0m against a statutory 5.2%, the gap being property gains and the contingent consideration.

Operating cash flow. Down 19.0%, with a half on half reversal, $63.9m in the first half against $39.8m in the second, accounted for by working capital movements. The inventory leg is the same drawdown-and-rebuild cycle that drives the factory overhead recoveries — reduced through 2H FY2025 and 1H FY2026, rebuilt in 2H FY2026.

Capital expenditure. $24.0m property and $12.6m plant and equipment, weighted to the second half — $11.7m of property, plant and equipment in the first half against $23.7m a year earlier, and $25.0m in the second. Total investing outflow fell from $83.0m to $34.3m, the prior year carrying the ORW investment and acquisitions.

Dividends and the balance sheet. $83.6m of fully franked dividends were paid, being the FY2025 50.0 cents special, the FY2025 35.0 cents final and the FY2026 34.0 cents interim. Cash closed at $47.9m with no debt, down $21.3m.

Final dividend. 35.0 cents per share, fully franked at a 30% tax rate. Payable 23 October 2026; record date 9 October 2026. Total ordinary dividends 69.0 cents per share, unchanged on FY2025. No further special dividend: “There hasn’t been any talk from the directors about paying another special dividend”.

ARB reports sales in three customer categories: the Australian Aftermarket, Exports, and Original Equipment (accessories supplied to vehicle manufacturers for factory or dealer fitment, Australia only).

Australian Aftermarket. ARB’s key Australian platforms fell 4% and its own sales fell less — “ARB's sales were less impacted than the industry-wide decline in new 4x4 vehicle sales”, which the CEO put at “a couple of points better than the fall in the 4x4 new vehicle market”, excluding subsidiary businesses.

The vehicles that drive it. “Australia’s top 3 selling pickups, the Ford Ranger, the Toyota HiLux and the Isuzu D-Max, all declined as did the top 3 selling SUVs.” Ranger and HiLux, “Australia’s two most popular 4x4 vehicles”, each fell 4%; Toyota Prado fell 10% and the LandCruiser 70 Series 38%, both “constrained by availability of key Toyota models”. “A genuine standout was the BYD Shark, up 64%” — though inquiry through ARB’s e-commerce site and at the National 4x4 Show was “still not a lot”, and messaging to that platform is being reworked.

Concentration has not moved. “The top 10 4x4 vehicles continuing to account for more than 70% of the market”, and ARB “deliberately prioritises established, high-volume platforms while monitoring and strategically expanding its range for the growing tail of new entrants”. The Ranger Super Duty was “a standout from being first to market”, with a fitment rate “higher than we’ve ever seen on any vehicle platform” and “an associated lift in fitment rates on Ranger and the new HiLux over the same period”.

Within the category, the mix moved. “Retail sales in our corporate stores were resilient, offset by softer sales to wholesale customers, including independent stores and stockists and fleet customers”, and “most wholesale customers managed their inventory down in the financial year, relying on healthy corporate stock holdings”; the CFO named “the dealer and fleet channels most significantly impacted by lower new vehicle deliveries”.

The Australian network. 80 stores, 33 Company owned and 47 independent, after two flagship upgrades and three all-new flagship sites — including Townsville at 3,527m², “the newest and largest ARB store in Australia” and independently owned — plus a first dedicated fleet fitting centre at Auburn, New South Wales.

Store development. “We have a long list of independent store owners wanting to invest in future and further stores alongside a strong pipeline of our own corporate store developments.” The three-year pipeline is “reasonably mature”, work on regional cities and towns has commenced, and a new preferred partner program was named but not defined.

Digital and service. The Australian website migrated to an integrated Adobe e-commerce platform, with a single source of product information, pricing and fitment feeding store inventory through direct ship, click and collect and online quotes. ARB remains the most-visited 4x4 accessory website in Australia, with “nearly twice as many customers now use the site to find their local stores and stockists”. Fitter retention improved through “multiple recruitment and retention initiatives”, and Net Promoter Score rose from 68 to 75.

Ford. The Ford Licence Accessory programme, more than 180 branded products for the Ranger and Everest, “grew again in FY 2026... even as the Ford Ranger sales declined”. Engineers on both sides have started the next Ranger and Everest, “collaboration…well into 2030”.

Subsidiary brands. ARB also distributes to niche Australian Aftermarket segments through SmartBar, Kingsley Enterprises and MITS Alloy. “The GoActive Outdoors business ceased during the year, but the loss of this sales channel was more than offset by growth across the Company’s other subsidiary businesses.” MITS Alloy, acquired in FY2025, remains inside a five-year earn-out.

Exports. Now 38.2% of sales from 36.6%, but the whole of the growth came in the first half — against a February statement expecting “continued growth in 2H FY2026... particularly in the US market”. The stronger second-half Australian dollar cut the translation of export sales.

The US. Up 13.5% in US dollars and 10.2% in Australian, “despite the ongoing economic and political challenges facing the U.S. market”, with all channels performing — wholesale, the ORW networks, e-commerce and OEM. Latin America e-commerce also contributed.

The US brands. Through Toyota USA, ARB added “the ARB branded roof rack for the RAV4”, incremental in FY2027 as the Trailhunter programme matures into like-for-like sales. Poison Spyder “performed well in its first year after relaunch with demand outstripping supply”, with a strong inventory pipeline now positioning the brand for ongoing growth. ARB USA has begun selling canopies into the US starting with the Tacoma — “a unique pre-painted ready-to-install solution that gives us a competitive edge”.

Meyer. In early 2026 ARB announced an exclusive distribution partnership with Meyer, “one of the nation’s leading accessory distributors”. “The early success of this program has prompted further model developments, including the USA Ranger and... the F-150, which will debut at SEMA this year.”

US engineering and distribution. ARB completed “the first fully U.S.-led development of suspension for the latest model 4Runner, which put ARB first to market and marked a major capability milestone”. The engineering centre is “fully operational and scaling with more engineers and new equipment”, building “a full range of full-size and midsized trucks across both suspension and fabricated protection products”, and collaborating with the Australian team on the Tacoma and LandCruiser 250. West-coast distribution moved from Auburn, Washington to Norco, California in June, bringing inventory closer to ARB’s largest customers.

ORW / 4 Wheel Parts. The 50%-owned joint venture, 48 stores across 9 states — “high double-digit growth in ARB sell-through, primarily driven by increased sales of ARB accessories, including expanded ranges from our engineering teams”, and it “continues to operate profitably”. ARB’s equity accounted share swung from a $1,908k loss in FY2025 to an $854k profit.

The store-in-store rollout. 8 stores completed, “a further 22 due by the end of calendar year 2026”, the remainder on track across all 48. Stores are “trained and educated on ARB products a lot better”, with “incentive structures in place to make sure that the store members are rewarded for selling through ARB products”. The capital cost is not disclosed — “a significant investment that we don’t take lightly”. Ahead: “a renewed e-commerce platform launches in the first half of FY 2027”, and a plan to “transition 4 Parts to a focused premium retailer aligned with the ARB brand experience from FY ’28”.

The United Kingdom. The pick-up market more than halved in the second half after the double-cab tax change, though “sales of ARB branded product through the U.K. Truckman business doubled year-on-year”. Truckman has been awarded canopy contracts for incoming Chinese EV and hybrid models — won “with the Truckman brand for those future contracts, not the ARB brand”.

Europe, the Middle East and Asia. Mainland Europe grew “despite ongoing pressure in part of the light commercial vehicle sector”; the aid and relief business lost funding, with defence use of midsized 4x4s “expected to offset those declines in FY 2027”. The Middle East was hit by regional conflict, “however, much of this decline was offset by servicing regional customers directly from our global distribution centers”. Asia was “the other strong contributor”.

China and South Africa. ARB China opened in May 2026, with capital going into “stock and inventory and marketing”. “Being important to Chinese OEMs in Australia is beneficial, but being important to Chinese OEMs in China, whilst a bigger hill to climb, no doubt is our goal.” The South African entities were incorporated in April 2026 — the HiLux, Ranger and D-MAX “are all built in South Africa on a CKD basis”, against “a 30-plus year heritage as a premium brand in Africa”.

Original Equipment. “ARB’s biggest challenge in FY2026”. The decline was “cyclical, driven by a lull between major vehicle programs and constrained supply of vehicles rather than any change in ARB’s competitive position. We have not lost any OEM contracts by customer or by product segment.” Australia only; ARB states the category “excludes the OE business outside of Australia”, so the US OEM work sits in Exports.

U.S. retail swings to profit. ARB’s share of its US retail associate swung from a $1,908k loss to an $854k profit in the first full year after 4 Wheel Parts came out of Chapter 11. The 53-store network was rationalised to 48 — three closed for proximity, two for performance — and now delivers “high double-digit growth in ARB sell-through”. No further ARB cash went in this year. Eight stores are converted, 22 more due by end-2026.

U.S. distribution consolidated into one site. The Auburn, Washington distribution centre migrated in June to an 8,100m² facility in Norco, California, bringing inventory "closer to ARB's largest customers, particularly 4 Wheel Parts in California", with daily delivery to Southern California stores and overnight service to the west coast. Norco also houses the US engineering centre, "fully operational and scaling with more engineers and new equipment". In early FY2027 one of 4 Wheel Parts' smaller distribution centres folds into the site, as the Texas and Florida sites already have.

Management steered FY2027 margins to the FY2026 full-year average, not the stronger second half. The second half printed 40.9% of sales in materials and consumables, the best in two years. The swing factors named are outside ARB’s control — the Thai baht, hedged only to November 2026, the Middle East conflict, steel prices and labour costs.

The BYD Shark vehicle growing not converting to ARB product growth. BYD Shark sales in Australia grew 64%, a clear standout in the region. ARB showed a Shark with a MITS Alloy tray and a new Summit MKII Bull Bar at the National 4x4 Show. Though through both e-commerce and from the 4×4 show: “still not a lot of inquiry. And so we’ll have to dig deeper to understand that.”

No mention of the Earth Camper. A newish product/category was not in investor materials this result.

Q: Quantum and timing of the two price increases?
A: “the first price increase back in August 2025 was just a little over 2%...we probably had about 9 months’ worth of value from that price increase through the financial year. The second...was in February 2026, probably took effect from April. So we probably got the benefit of 3 months...at between 3.5% and 4%, depending on weightings.”

Q: Do the second-half margins continue?
A: “Gross margins were particularly strong in the second half. And even across the year, we’re at the upper end of margins achieved over the last 5 or 6 years or so...The Thai baht of course, is a major factor, and it’s trending in our direction at the moment...steel prices, of course, are pushing up with labor costs also remaining under pressure...moving into FY 2027, we would expect the margins to trade in line at this stage with the average of 2026 across the full financial year.”

Q: What hedging is in place?
A: “We are currently hedged out until November 2026...at around about the THB 23 to the Australian dollar...it’s been up as high as [ THB 23.6 ] more recently, there may be some opportunity there, but the foreign exchange, of course, could go either way.”

Q: Did rising second-half inventories lift margins?
A: “No. The increase in inventories wasn’t material and certainly didn’t have a material impact on our factory throughputs.”

Q: Quantum of the tariff refunds?
A: “ARB did qualify for a tariff refund during the second half of the financial year. The tariffs paid...were expensed in an earlier period...but the quantum is not material.”

Q: US growth prospects?
A: “Whilst we don’t provide guidance, we are confident that all the strategic endeavors are going to continue to allow us to grow in the U.S. We are comping off the OEM business...the Trailhunter program...have matured into like-for-like sales. However...we have added the...RAV4 Roof Rack to our sell-through Toyota channels, which will be incremental in FY 2027 relative to FY 2026.”

Q: Is the Tacoma the key US platform?
A: “confirming that is one of the most popular platforms. ARB’s association over many years with Toyota is particularly strong, and that definitely includes the U.S. market.”

Q: Capex to convert the 4 Parts stores?
A: “we won’t specifically...it is a...significant investment that we don’t take lightly, but we are definitely monitoring the revenues that are flowing from those investments...a lot of work has actually gone into making sure that the stores are trained and educated on ARB products a lot better. There are incentive structures in place to make sure that the store members are rewarded for selling through ARB products.”

Q: Capacity to fit the Toyota backlog?
A: “with improved fitter retention comes maturity of those fitters and efficiency of those fitters...we’re in a great position with respect to fitters relative to the prior 2 years. We could still absolutely do with more fitters...we are actively recruiting in each state.”

Q: New product at the 4x4 shows?
A: “We had a stunning BYD shark on display with the MITS Alloy tray on the back and an all-new Summit MKII Bull Bar...still not a lot of inquiry. And so we’ll have to dig deeper to understand that.” “We did import from the Middle East, the new Y63 Patrol. That vehicle is not in market in Australia yet...we’ve showcased a whole range of new products on that vehicle to get ahead of the market.”

Q: China investment in FY27?
A: “We’ve landed a number of containers of inventory...There is a small team with an office...mainly a wholesale marketing and business development group. The majority of our capital investment will be in stock and inventory and marketing...we’ve got dedicated teams and specific marketing agencies working on the brand development of ARB in China.”

Q: Australian network expansion?
A: “Damon and I have been very consistent in talking about 3 to 5 stores per year, and we’re on track for that...our next 3 years of store development and pipeline are reasonably mature...at the AGM, we’ll be talking in more detail about our new preferred partner program.”

Q: Are the tariff refunds under 5% of FY26 NPAT?
A: “It’s significantly less than that. It’s not a material number and...hasn’t influenced the result materially at all.”

Q: Why no second special dividend?
A: “There hasn’t been any talk from the directors about paying another special dividend. I think it was 10 years between the one that was paid last year...2015 through to 2025.”

Q: How far ahead is the baht normally locked?
A: “We’ve historically...locked in the Thai baht 3 to 4 months out...we’re locked until November around about that THB 23 rate. And then we’ll start to take some more position again in the next couple of months.”

Q: Positioning in defence?
A: “some of the increased ARB sell-through the U.K. Truckman business is reflected in some of that defense work starting. Defense work, however, is slow and does take time. A lot of red tape...it’s a very complex sector to sell into. And we are not afraid of saying it is new to us in the European and the U.K. market...our guys are on the ground understanding, quoting and winning contracts on a consistent basis.”

Q: Content on the Truckman Chinese EV contracts?
A: “I won’t call out specific platforms...at the AGM potentially as that information will be in the public sphere. However, they are canopy contracts, which is obviously the Truckman’s core business. and they have been won with the Truckman brand for those future contracts, not the ARB brand.”

Q: Manufacturing and R&D against a fragmenting market?
A: “I think this is where size counts. It’s well known that ARB’s scale, our balance sheet and the size of our engineering team is a competitive advantage that we have. Our belief is that if we can make sure that the systems and processes we have for our engineering team and the speed at which we can bring product to market with the more fragmented market will actually be a competitive advantage to us...It is capital intensive. We’ll have to manage our inventory really, really well. But I do think it will make it quite challenging for the smaller players in the market to keep up with the volume of new EVs coming in.”

Q: Current R&D spend, and expensed or capitalised?
A: “we’re fairly conservative in this space and don’t capitalize much of our expenditure. Our R&D expense is about $20 million for the year, and we capitalize...from memory, it’s about $4 million.” “without speaking specifically in dollar terms about the uplift, know that 10% to 15% has been queued in...we have made allowances for additional investments in manufacturing where needed...we do expect and have forecast for an uplift in marketing spend in the new financial year.”