The ARB Corporation Ltd (ASX: ARB) share price is smashing the market today, up nearly 8% as investors react to the company’s FY20 report. Here’s what you need to know.
The 3 key points
- Sales revenue grew 4.8% to $465.4 million;
- Net profit after tax (NPAT) edged 0.3% higher to $57.3 million; and
- A final dividend of 21 cents per share was declared, flat over FY19.
ARB said its growth in FY20 was hampered by difficult local and global market conditions, including the impact of COVID-19, the weaker Australian dollar and further declines in new vehicle sales.
Analyst estimates
Analysts at Bell Potter/Citi were expecting NPAT of $47 million, while the consensus NPAT target was $50.9 million. So, ARB comfortably beat these estimates.
Impact of COVID-19
ARB said its sales grew consistently at 7.6% throughout the financial year to March 2020. However, sales were significantly down in April and May due to a decline in customer orders in March and April. As a result, ARB qualified for the JobKeeper subsidy and received a total of $9.5 million from Australian and New Zealand government schemes.
The company then experienced an unexpected rapid return of customer orders in May following the easing of restrictions, which reversed the decline in orders in the prior months. However, ARB scaled back its manufacturing capacity and deferred third-party purchases in anticipation of a prolonged downturn and as a result, hasn’t been able to fill many of these customer orders.
ARB said it has been difficult to reinstate its manufacturing operations in Australia and Thailand. So although its current order book now sits at record levels, the fulfilment of customer orders remains challenging.
ARB’s cash balance at the end of FY20 was $41.6 million, an increase of $33.1 million, supported by the deferred payment of the interim dividend announced earlier in the year. The company also has access to unutilised borrowing facilities of $55.6 million, leaving ARB well placed to take advantage of investment opportunities that may arise.
ARB’s dividend
ARB declared a final dividend of 21 cents per share, fully franked. Combined with the interim dividend which will be paid in October, ARB’s full-year dividend is 39.5 cents per share, consistent with FY19.
At the time of writing, ARB shares are trading at $23.55, putting shares on a dividend yield of around 1.7%.
What next?
Looking forward, ARB said: “The Board remains focussed on the long term growth of the Company as it develops and pursues a number of exciting opportunities. This includes further growth in export markets, new products and improved distribution.”
However, it declined to provide operational guidance due to the dynamic and unpredictable impact of COVID-19.
ARB did note that the recent strengthening of the Australian dollar, particularly against the Thai Baht, has reduced the cost of the company’s Thai-manufactured product and improved sales margins.
However, recent stage 4 restrictions in Melbourne will slow production, warehousing activity and retail in the area.
ARB finished by saying that it recently achieved its highest-ever monthly sales in July. It will provide a first-quarter trading update at its annual general meeting in October.
To keep up to date with the flurry of ASX reports throughout August, check out Rask Media’s ASX reporting season calendar.
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