The ARB Corporation Limited (ASX: ARB) share price has come under pressure on Tuesday.
In morning trade the four-wheel drive vehicle accessories company's shares are down 5% to $17.54.
Why is the ARB share price tumbling lower today?
Investors have been selling ARB's shares this morning following the release of a market update before the opening bell.
That market update provided investors with the company's expectations for the first half of FY 2020.
According to the release, ARB expects to report total revenue of $234 million in the first half. This represents a solid 7.1% increase over the prior corresponding period.
However, as the company warned at its annual general meeting in October, ARB's half year net profit will be lower than the prior corresponding period.
Management has advised that, based on its unaudited accounts, it expects to post a 7.4% decline in net profit after tax during the first half.
It advised that this reflects the significant strengthening of the Thai baht since this time last year. This unfavourable currency movement has led to an increase in the company's costs on a range of products which are manufactured in ARB's Thai factories.
At its annual general meeting the company's chairman explained: "Although the lower Australian dollar increases ARB's offshore revenue opportunities, in the short term it has a significant impact on the cost of the Company's Thai manufactured products and negatively impacts sales margins. The Company is taking measures to offset the increased cost, but the exchange rate will continue to affect the Company's performance throughout the first half of the new financial year."
However, it appears confident this will be just a short term issue. At the meeting it also advised: "With strong brands around the world, capable senior management staff, and a strong balance sheet and growth strategies, the Board believes ARB is well positioned to achieve long term success."
