ARB Corporation: Even nature can't slow this company down

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ARB Corporation Limited (ASX: ARP) today reported revenues up 2.3% and net profits up 1.6% for the first half FY 2012, despite significantly adverse impacts on the supply of new 4WD vehicles worldwide. Supply was impacted by the Japanese earthquake and tsunami, and then compounded by floods in Thailand in November 2011.

Manufacturing plants in both Australia and Thailand are back running at full capacity and the company is again increasing capacity. Vehicle supply is recovering and company expects supply to be back to normal before the end of June 2012.

Modest growth in the USA is beginning to return as well, and ARB expects to achieve reasonable growth for the full 2012 financial year compared to 2011. (Net profit grew 16% in 2011 over 2010).

ARB – the company

ARB is mainly involved in design, manufacture, distribution and sales of motor vehicle accessories, such as bull bars, roof racks, canopies, tow bars, winches, snorkels, touring and camping accessories, mainly for the 4WD market.

As at 31st December 2011, ARB had 43 stores, 16 of which are owned by the company. The company opened a new ARB store in Orange, NSW and two ARB licenced stores opened, one in Queensland and one in Western Australia. ARB continues in invest in R&D and believes that this spend is vital to its long term competitive advantage. The company expects to release new products and open new stores in future.

Full year expectations

The fact that the company has managed to increase sales and profits over the last corresponding period speaks volumes for the strength of its brand and competitive advantage. However, the net profit margin of 13.7% is slightly lower than 2011's full year margin of 14.8%. I expect margins to recover in the second half, and full year results to improve over the first half's performance.

ARB's Financials

ARB has no debt and $32.5m in cash. The company has been known to pay special dividends (2001, 2005 and 2010), so may utilise this extra cash to pay special dividends in future.

Although ARB is currently trading on a trailing PE of 16, over the last 10 years, it has achieved average EPS growth of over 17% per year. Revenues, earnings per share and dividends have increased every year since 1998. Based on these results and the company's view that global vehicle supplies will return to normal fairly soon, ARB is definitely a company worthy of further research.

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Motley Fool contributor Mike King owns shares in ARB Corp. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy

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