ARB Corporation Limited

Good morning ladies and gentlemen and welcome to the ARB Corporation 2026 full year financial results presentation. My name is Lachlan McCann, Chief Executive Officer at ARB and joining me is Damon Page, ARB's Chief Financial Officer and Company Secretary. Today Damon will take you through a financial update on the full year results and I will present an update on ARB's domestic and international sales and general business operations. Some housekeeping before we commence. During the presentation, questions can be made through the chat box. At the top right-hand corner of your screen, you'll see a Q&A icon. By clicking this, it will open a chat box for you to enter your questions. At the conclusion of the presentation, Damon and I will answer as many questions as possible. Before I hand over to Damon, I'd like to frame up the year with four key messages. The 2026 financial year was played out against a challenging economic and geopolitical backdrop. Vehicle supply and, to a lesser extent, demand softened new vehicle 4x4 sales in a number of countries, including here in Australia, which flowed directly through to our sales. We remain bullish on the prospects for growth in the Australian aftermarket, and later in the presentation I will speak to increased investments in engineering that we're confident will drive higher revenues. Despite this, our profit was well protected. An improved performance in the second half brought our margins back in line with FY2025 and given the headwinds and foreign exchange challenges, we believe this is a very resilient result. Underpinning all of this is the strength of the ARB brand and the quality of our products. This is reflected in strong gross profits, higher accessory attachment rates and higher revenue per fitment on key vehicle platforms. in our key markets. And finally, our strategic investments into global engineering and distribution are delivering strong returns, with even more expansion planned for the years ahead. With that framing, I'll now hand over to Damon to run through the financial presentation.

Well, thank you, Lachlan, and good morning, everybody, and welcome. as we present ARB's results for the financial year ended 30 June 2026. Firstly, I can confirm that we have lodged all of the year-end documents with the Australian Securities Exchange earlier this morning, along with a copy of this presentation that we will talk through during this broadcast. All of the documents, including the annual report, the chairman's letter to shareholders, and the dividend notification for FY2026's Final fully franked dividend of $0.35 per share can be downloaded from the ASX website. Commencing with sales revenue to the left of slide 5, ARB achieved sales revenue of $702 million for the financial year ended 30 June 2026. representing a decline of 3.8% or $27.9 million compared with last year's sales revenue of $729.9 million. This result was achieved in a challenging economic and geopolitical environment. Strong sales were achieved in the US, Europe and Southeast Asia while lower new vehicle sales in Australia and constrained consumer discretionary spending weighed on the domestic results. The company's compound average growth rate in sales achieved over the last 10 years is 7%. In the middle of the slide, the company's profit before tax declined 8.9% to $123 million. This is a decrease of $11.9 million compared with last year's profit before tax of $134.9 million. Importantly, the shape of the result improved as the year progressed. first half profit before tax declined $13.2 million or 18.8% whereas second half profit before tax grew 1.9% reflecting the recovery in sales margins. Profit before tax for the year excluding one-off non-operating transactions declined 10.5%. The decline in overall profit was a result of lower sales volumes while the gross margins and operating expenses were relatively comparable to the prior year. The compound average growth in profit before tax over the past 10 years is 6.7%. Across on the right-hand side of the slide, the company achieved profit after tax of $92.4 million. This compares with $97.5 million last year, a decline of $5.1 million, or 5.2%. Excluding non-operating transactions, profit after tax declined 7.5%. The effective tax rate decreased to 24.9% from 27.7% in FY 2025. This reduction in effective tax expense is attributable to a higher proportion of profits being generated in Thailand. Basic earnings per share of $1.11 declined 5.9%. And the profit after tax... 10-year compound average growth rate is 6.9%. Slide 6 presents the sales performance of ARB's three sales channels being sales into the Australian aftermarket, export sales and sales to the original equipment manufacturers or OEMs. Sales into the Australian aftermarket declined 3.3% to $390.1 million. with sales of ARB's key Australian vehicle platforms down 4%, which Lachlan will talk to more specifically shortly. Results were mixed across the domestic sales channels, with the dealer and fleet channels most significantly impacted by lower new vehicle deliveries. The challenging consumer market and constraints on discretionary consumer spending also weighed on the results. The Australian aftermarket represented 55.6% of total sales, broadly in line with 2025. Export sales grew 0.5% to $268.4 million and represented 38.2% of total group sales, marginally up from 36.6% in FY2025. The stronger Australian dollar in the second half of FY2026 also resulted in a lower translation of export sales into Australian dollars. The Americas achieved growth of 10.2% despite difficult trading conditions, while the UK was materially impacted by lower new vehicle registrations and trading conditions in New Zealand and the Middle East remaining challenging. Sales revenue to OEMs to the right of the slide in Australia of $43.4 million declined 27.2% and now represents 6.2% of total sales down from 8.2% last year. The decline in sales to OEMs is attributable to the timing of new contracts with the prior year benefiting from new contracts initiated in FY 2025. Lower new vehicle deliveries in the second half of FY2026 also impacted reported OEM sales with increased new vehicle deliveries expected to improve in the first half of FY2027. Slide 7 provides an overview of the company's profit and loss statement including year-on-year movements against last year and expenditures shown as a percentage of sales in each year. Having spoken to sales already, I'll focus on the key movements in the expense line items Materials and consumables used decreased to 42.4% of sales in FY2026 from 43.3% in FY2025. The improved margin across the full financial year reflects the stronger Australian dollar against the Thai baht during the second half, compensating for the significant downside reported during the first half, when the Australian dollar was at historical lows against the Thai baht. Inflationary pressures were largely offset by two sales price increases implemented during the financial year. Overall, the reduction in materials and consumables of 5.7% against the reduction in sales of 3.8% demonstrates the impact of those improved margins. Employee expenses increased 1.9% across the year to $179.5 million. absorbing an annual wage adjustment of circa 3.5%, which was processed in October 2025. This increase was partly offset by a reduction in the use of contractors in manufacturing operations. Depreciation and amortization increased $3.2 million, or 9.8%, reflecting the recent expanded capital expenditure program, particularly in property and manufacturing capital expenditures. whereas advertising, distribution, finance and maintenance expenses were each broadly consistent with or marginally below the prior year. Occupancy costs were contained with an increase of 2.5%, reflecting an increased number of sites and higher power costs. And pleasingly, the equity accounts of share of ARV's 50% shareholding in the off-road warehouse and four-wheel parts retail network and the 49% shareholding in the Nacho Lighting startup achieved a profit share of $854,000 which compares with the equity accounted loss of $1.2 million reported in the prior year. Other expenses increased 6.3% driven by IT protection software, compliance costs including sustainability reporting and fleet fuel costs. The conflict in the Middle East also impacted sales volumes, timing of deliveries, fuel prices and distribution expenses during the year. Overall, the company's underlying profit before tax of $118.6 million declined 10.5%, with the decline almost exclusively attributable to lower absolute gross profit resulting from the decline in sales volumes. non-operating items include $3 million of gains on property sales and a $1.35 million reduction in contingent consideration relating to the MITS Alloy acquisition. MITS Alloy was acquired in FY 2025 and the consideration included a contingent payment subject to the achievement of specified financial performance targets over a five-year earn-out period, designed to protect ARB from overpaying on vendor projections. Accordingly, on the bottom line of the table, the company reported profit before tax of $123 million, which declined 8.9% compared with $134.9 million last year. Slide 8 separates the four-year result into the first and second halves to illustrate the recovery or stronger second half of the financial year. In the first half, towards the middle of the table, underlying profit before tax of $58 million declined 16.3% compared with the first half in FY2025. As described at the time, this decline was largely driven by the weaker Australian dollar against the Thai baht, noting ARB's significant manufacturing and distribution operations in Thailand. and an over-recovery of factory fixed costs in the prior comparative period when inventory levels increased to historical highs. Net operating expenses in the first half of $143 million were held consistent with the prior comparative period despite the relatively high inflationary environments. In the second half, underlying profit before tax of $60.7 million declined just 4.3% as margins improved significantly, with the Australian dollar against the Thai baht returning to levels consistent with the prior comparative period. Net operating expenses of $142.7 million increased 2.8%, reflecting the annual wage adjustment in October 2025 and the flow-on impacts of the conflict in the Middle East. On a reported basis, second half profit before tax of $65.9 million grew 1.9% over the prior second half, a significant improvement on the 18.8% decline reported in the first half. Now, although non-operating items are excluded from underlying profit, you will note that the $2.2 million tool of discontinuation loss recognised in the first half of FY2026 was reversed in the second half of FY2026. The expense report in the first half related to the write-off of goodwill following the termination of the Australian tool of distribution rights. The reversal took place in the second half because the goodwill had been allocated to the Australian aftermarket cash generating unit in 2024 and, per accounting standards, could no longer be separately identified at the original acquisition level. notwithstanding the loss of the distribution agreements. On slide 9, cash flows from operations broadly equal profit after tax plus depreciation, less foreign exchange movements. Cash flow from operations generated $103.7 million compared with profit after tax of $92.4 million. Working capital movements are relatively contained with trade debtors down $7.7 million, inventory up $6.1 million and trade payables up $2.8 million. The company invested $36.6 million in property, plant and equipment with $24 million spent on property and $12.6 million spent on plants and equipment. The company paid $83.6 million in fully franked dividends during the year, comprising the FY2025 special dividend of 50 cents, along with the FY2025 final dividend of 35 cents and the FY2026 interim dividend of 34 cents. All dividends were fully franked at the 30% corporate tax rate. Now, the board has announced the final fully franked dividend of 35 cents per share for FY2026. At the end of the financial year, the company had $47.9 million in cash and had no debt. Net cash reduced by $21.3 million during the year, reflecting the payments of the $0.50 special dividends. Thank you, and I will now hand back to Lachlan.

Thank you very much, Damon. Let's start with a look at the Australian sales of those vehicles called to ARV's business. As Damon mentioned, FY26 was again a challenging year for new vehicle sales across most of the 4x4 pickup and SUV models called to ARV. Australia's top three selling pickups, the Ford Ranger, the Toyota Hilux and the Isuzu D-MAX all declined, as did the top three selling SUVs in the Ford Everest, the Toyota Prado and Isuzu D-MAX. Despite the softer market, the Ranger and Hilux remain ARB's stronghold and are still the dominant vehicles in the market. Constrained by availability of key Toyota models, the Prado, the Land Cruiser 300 Series and the Land Cruiser 70 Series weighed on our sales through the year. Encouragingly, Toyota is forecasting higher sales of these models in the second half of the 2026 calendar year. A genuine standout was the BYD Shark, up 64%. But as this graph demonstrates, the Hilux and the Ranger, particularly the Super Duty, were the focus of ARB's engineering resource in FY2026, with the Shark a close third with our line-up for this model continuing to take shape. Looking forward, we expect FY2027 new vehicle sales to be broadly in line with FY2026, Although with the improved status of Toyota vehicle supply we expect the mix to be favourable. ARB's store network now comprises of 80 stores nationally. 4x4 accessories require specialist knowledge, specialist facilities and specialist skillsets to sell and install and our customer expects a premium experience. ARB has built the best specialised 4x4 aftermarket distribution network in Australia and we are confidently driving the expansion of this proven formula. In FY26 we completed two flagship upgrades with three all-new flagship sites. Clear evidence of our confidence and the confidence of our network in the future of ARB in Australia is best demonstrated by the 3,527 square metre flagship store in Townsville, Queensland. the newest and largest ARB store in Australia. Congratulations and thank you to Mike and Kelly Elliott on the opening of the Townsville store. A significant step this year was the establishment of our first dedicated fleet fitting centre in Auburn, New South Wales, extending our specialist model into this growing fleet channel. Fleet represents a healthy portion of ARB's Australian sales and this new centre in Auburn provides a seamless, one-stop shop solution for our fleet customers. Further work on expanding our presence in regional Australian cities and towns has commenced and I look forward to presenting more on this initiative at this year's AGM. 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. During the year, ARB migrated its Australian website to the state-of-the-art integrated Adobe eCommerce platform. This site delivers a seamless customer experience, supporting the customer journey by product or by vehicle, providing a single source of product information, pricing and purchases, and using an integrated fitment database to guarantee accessory suitability. It is a true premium omnichannel offering, with direct ship, click and collect online, or quote requests, all directly integrating into private and corporate store inventory management. Importantly, it gives us far better insights customer insights with detailed analytics on our customers, the products and platforms they most search and ultimately transact on either online or in-store. These insights are already driving smarter decisions on marketing and product development. The transition has been a success. ARV has maintained its position as the number one visited 4x4 accessory website in Australia. Nearly twice as many customers now use the site to find their local stores and stockers. and we're seeing strong early growth in direct-to-consumer product sales from a standing point. We have a strong pipeline of store enhancements underway with international expansion to follow. The Australian aftermarket had a challenging FY2026 with ARV sales excluding subsidiary businesses performing a couple of points better than before in the 4x4 new vehicle market. Retail sales in our corporate stores were resilient, offset by softer sales to wholesale customers including independent stores and stockists and fleet customers. Most wholesale customers manage their inventory down in the financial year, relying on healthy corporate stock holdings. Fitter performance and team retention remains a focus. The success of multiple recruitment and retention initiatives is delivering a sustained improvement in the retention and the reduction in turnover, and we continue to actively recruit for fitters in all states. On customer satisfaction, our Net Promoter Score is an excellent barometer of customer loyalty. Over the last 12 months, ARB's NPS has increased for an average of 68 to 75, an outstanding result by an industry standard, indicating highly and increasingly satisfied customers across Australia. The Ford Licensed Accessory Program is where ARV has partnered with Ford Australia and Ford globally to deliver in excess of 180 branded accessory products for the Ranger and the Everest platforms, available through Ford dealerships with Ford's full 5-year warranty. FLA revenue grew again in FY2026, a true testament to the program, even as the Ford Ranger sales declined, which speaks to the depth of the partnership. The Ranger Super Duty was a standout, from being first to market through to strong take-up across the new range. The Super Duty accessory revenue should highlight to investors, which I'll speak to later in the presentation, the importance of vehicle type as a barometer for ARB sales as opposed to the quantity of vehicles sold. Ford engineers and ARB engineers have commenced work on the next model Ranger and Everest, with both companies locked at the hip to enhance this successful collaboration well into 2030. Our local manufacturing gives us a genuine speed-to-market edge. Highlighted by the accessory prototype that rolled out on the mid-model special interest pack, the Raptor Desert Pack, these factory-backed accessories on Ford's key platforms keep us well ahead of our competitors. Ford and ARV continue to discuss further product opportunities and are actively working on the FLA rollout in New Zealand and South Africa. And now on to ARV's export business. ARB's export business recorded a net increase of 0.5% in FY2026 in a challenging international environment and now, as Damon mentioned, represents 38.2% of group sales. The USA was again a major growth region, with sales through our wholesale, full partner ORW networks, e-commerce and other channels all delivering strong growth despite significant economic and tariff headwinds. Asia was the other strong contributor to the financial year, partially offset declines in the UK, Middle East and New Zealand. The stronger Australian dollar in the second half also reduced the translated value of export sales in Australian dollar terms, the USA most notably, which grew 13.5% in US dollar terms. The Europe and the Middle East region was impacted by multiple economic and political challenges. European sales were broadly stable, with local sales in mainland Europe growing despite ongoing pressure in part of the light commercial vehicle sector. Our aid and relief business was impacted by reduced funding. However, the increased use of mid-size 4x4 vehicles in the defence space is expected to offset those declines in FY2027. In the UK, the pickup market contracted sharply following tax changes affecting double cab pickup sales. with registrations down more than 50% in the second half. Despite this, sales of ARV-branded product through the UK truckman business doubled year on year. 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. The capital investment in the Middle East reflects our long-term vision for this region. The Middle East was impacted by regional conflicts which disrupted shipping routes, container costs and broadly demand. However, much of this decline was offset by servicing regional customers directly from our global distribution centres. A real demonstration of the resilience and our flexibility of our distribution network globally. ARB China Co Limited, a wholly owned subsidiary, commenced operations late in the year. with local and Australian dignitaries attending the official opening in May. Establishing a local presence is a major step for re-establishing China as a key market for ARB. 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. Initial demand from the Chinese aftermarket customers is strong, with our focus on marketing investments and continued ARB brand development through Chinese social media channels which has commenced strongly. During the last 15 years ARB has evolved our corporate presence and localised our corporate offering in key markets such as Europe, New Zealand, Middle East, Asia and Thailand and China while expanding our USA footprint. Africa has been a continent that has remained an opportunity for ARB to enhance our localisation strategy. There are a number of great parallels between the African and Australian markets in the type of vehicle sold and the genuine reliance on function of vehicles and accessories. Despite the opportunity in Africa, today's sales materially lag ARB sales in Europe and Latin America. Similar to Thailand, South Africa builds pickups for the local European market, further expanding the opportunity. The Hilux, Ranger and D-Max are all built in South Africa on a CKD basis. We have a 30 plus year heritage as a premium brand in Africa with a loyal following established by our distribution partners which have paved the pathway for us to continue to grow sales in the region. We are establishing our own direct in-market wholesale operation in South Africa, beginning operation in the early part of FY2027. which will let us increase product availability, use pricing to drive volume and build an even stronger brand, targeting a step change in our African sales over the near to medium term. And now on to the US business. Despite the ongoing economic and political challenges facing the US market, ARB recorded growth of 13.5% in US dollar terms. All channels performed well, including the wholesale business buoyed by the Parts joint venture, Latin America e-commerce and the OEM business through Toyota USA which saw the addition of the ARB branded roof rack for the RAV4. Poison Spider has performed well in its first year after relaunch with demand outstripping supply and a strong inventory pipeline now positioning the brand for ongoing growth. ARB USA has commenced sales of our canopy or truck caps as they say in the US into local market starting with the Tacoma. Our canopy offers a unique, pre-painted, ready-to-install solution that gives us a competitive edge, and in early 2026 we announced an exclusive distribution partnership with Meijer, one of the nation's leading accessory distributors. The early success of this program has prompted further model developments, including the USA Ranger, and coming to market this financial year will be the F-150, which will debut at SEMA this year. ARV USA successfully completed the migration from our distribution centre in Auburn, Washington to our new home in Norco, California, bringing our inventory closer to our largest customers and providing a long-term home for our engineering team. ARV's presence in Seattle remains with the finance, marketing and other administration functions being run from this office. Our US engineering centre is now fully operational and scaling, with more engineers and new equipment for local prototyping and product development, bringing development closer to the market with more speed. The ARB team is building a full range of full-size and mid-size trucks across both suspension and fabricated protection products, targeting the largest and most valuable segments of the US market. The team will also design and develop future poison spider liner for current Jeep applications. A real milestone this year was the completion of the first fully US-led development of suspension for the latest model 4Runner, which put ARV first to market and marked a major capability milestone. Well done team. The US also collaborated closely with our Australian engineers on key platforms such as the Tacoma, LandCruiser 250, with these products now contributing to sales growth in the region. Our joint venture with Offroad Warehouse and Forward Parts continues to go from strength to strength. We've achieved high double-digit growth in ARV sell-through, primarily driven by increased sales of ARV accessories, including expanded ranges from our engineering teams, and the business continues to operate profitably. The ARB store-in-store rollout is progressing, while with eight stores completed to date, a further 22 due by the end of calendar year 2026, and they're remaining on track for a full rollout across the 48 stores in nine states. Looking ahead, a renewed e-commerce platform launches in the first half of FY2027. We are planning to transition four parts to a focused premium retailer aligned with the ARB brand experience from FY28. and will continue to grow ARB product availability across the network. Further store expansion opportunities have been considered by the board.