ARB Corporation Limited (A7W.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, welcome to the ARB Corporation 2025 Full Year Financial Results Presentation. My name is Lachlan McCann, Chief Executive Officer at ARB. And joining me today 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. [Operator Instructions] And at the conclusion of the presentation, Damon and I will answer as many questions as possible. Now before I hand over to Damon, this year, we're proudly celebrating our 50th year anniversary. Humility and respect are values that are highly regarded at ARB. So this celebration is less about us beating our chest, but more an opportunity for us to say thank you. Thanks to our employees. Thank you to our valued customers. Thanks to our suppliers and of course, thanks to our shareholders. Later in this presentation, I'll talk you through some of the initiatives we've undertaken to thank those who supported ARB to build this great company. But for now, I'll play a short video reel representing the 50-year journey at ARB. [Presentation]

Now would you believe we've had a slight technical glitch this morning so we're conscious that you can't hear the audio that goes with those videos, but we'll find a way to make those public, so people can listen into them as well as see them. ARB -- the ARB adventure, as most of you will know, started in the Brown family garage in Ringwood. In 1987, ARB listed on the second Board of the ASX and is one of only a few companies from the second Board or emerging companies listing that remains listed on the ASX today. From there, there is a story of expansion in product and distribution and one that has been largely organic. From the 1991 establishment of Air Locker Inc in Seattle, U.S.A. to our manufacturing expansion in Thailand in 2005 and the progressive build of the Australian retail business and brand throughout all these years, it's a history we're very proud of. But as leaders as of the -- but as a leadership team, we're more excited about how we'll contribute and grow over the next 50 years. With an ever-growing portfolio of products and strategic planning of our newly acquired retail stores and emerging customers in the U.S.A. and beyond, we're excited with what the next 50 years holds. And with that, I'll hand over to Damon to run you through the financial section of the presentation.

Thank you, Lachlan, and good morning and a warm welcome to everybody on the call as we present ARB's financial results this morning for the financial year ended 30 June 2025. Now just to note that we have lodged all of our year-end documents with the Australian Securities Exchange earlier this morning, along with a copy of the 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 2 dividend notifications for both a special dividend of $0.50 per share fully franked and fully funded from existing cash reserves and the FY 2025 final dividend of $0.35 per share fully franked can be downloaded from the ASX website. Commencing with sales revenue to the left of Slide 7, ARB achieved sales revenue of $729.9 million for the financial year ended 30 June 2025. This represents an increase of 5.3% or $36.7 million compared with last year's sales revenue of $693.2 million. This growth was achieved in a challenging environment, which I'll talk to further in the next slide. Export sales were the highlight of the result with double-digit sales percentage growth achieved in each of the 3 export geographical regions. However, sales revenue was flat in both the Australian aftermarket and original equipment channels with lower new vehicle sales in Australia and constrained consumer spending. The company's compound average growth rate achieved over the last 10 years is 8.3%. In the middle of the slide, the company's profit before tax declined 4.6% to $134.9 million. This is a decrease of $6.5 million compared with last year's profit before tax of $141.4 million. Profit before tax, excluding one-off adjustments, which related to capital gains on property sales, transaction costs related to acquisitions, and in the prior year, the final settlement of the Truckman contingent acquisition consideration, declined 7%. The decline in profit was a result of lower gross margins due to the weaker Australian dollar against the Thai bahts; the introduction of U.S. import tariffs; initial equity accounted losses of associates; and increased investments in people, marketing and distribution for future growth. The compound average growth in profit before tax over the past 10 years is 8.4%, in line with the sales revenue compound average growth rate. Profit before tax as a percentage of revenue was 18.5%, a decline from 20.4% last year, but slightly ahead of 18.2% achieved 2 years ago in FY 2023. Across on the right-hand side of the slide, the company achieved profit after tax of $97.5 million, which compares with $102.7 million last year. The decline of reported profit after tax of 5% and the profit after tax, excluding one-off adjustments of 7.6%, is broadly in line with the decline in profit before taxes just described. The effective tax rate increased to 27.7% from 27.4% in FY 2024. And earnings per share of $1.177 declined by 5.7%. Slide 8 presents the sales performance of ARB's 3 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 0.2% or $0.8 million to $403.3 million. Australian aftermarket sales were impacted by lower new vehicle sales, which is a key driver of ARB sales to this category and inflationary pressures, which constrained consumer spending. However, we believe ARB's steady Australian aftermarket sales was a solid result given new vehicle sales of key models, including the Toyota Hilux 4x4, the Ford Ranger and the Isuzu DMAX were each down 17% for the financial year. The highlight of this financial year is the company's export business. Its sales grew 16.4% to $267 million in FY 2025, with gains recorded across all 3 export geographical regions. Export sales represented 36.6% of FY 2025's total group sales, up from 33.1% in FY 2024. Specifically, growth in the United States represents the successful implementation of a number of new initiatives, which the Board is confident would deliver long-term brand and sales growth. These initiatives include the company's increased investment in its associate, ORW, which provides ARB with access to all of the ORW and 4-wheeled parts branded retail store network; the launch of a direct-to-consumer e-commerce site; and the expanding partnership with Toyota USA, including ARB-branded content fitted ex factory onto the new Halo platform to Trailhunter. ARB's international sales offices in New Zealand, Europe, Thailand and the Middle East posted strong revenue growth in FY 2025 while the U.K. result was flat to the prior year, mainly due to pickup vehicle registrations being down 6%. Turning to the right of the graph there to the slide there, sales revenue to OEs of $59.7 million for the financial year ended 30 June 2025 was flat following sales growth of 40.5% in FY 2024. Contracts for new model vehicles buffered the decline in new vehicle sales spoken to earlier, noting that sales into the OE channel can be volatile depending on the timing of multiyear contracts. Sales to OEs now represent 80.2%. That's 8.2% of the total sales compared with 8.6% last year. Slide 9 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 now focus on the expense line items, which have increased at a faster rate than the sales revenue growth as ARB continues to invest for future long-term growth and noting that each of the expense line items consolidate costs associated with the 3 businesses ARB acquired during the year, which are now fully integrated into the company's systems and processes. Investments include market salary and wage adjustments in vital areas; additional key resources in engineering, aftermarket, future e-commerce business and in the U.S.; and digital promotion of the ARB brand in key markets domestically and internationally. ARB continues to develop new products, increase its distribution partners and sales channels and its expanded store network. Specifically, materials and consumables used reflect margin pressure from the weaker Australian dollar, which now sits stubbornly at historical lows against the Thai bahts resulting in materials and consumables used increasing from 42.8% of sales in FY 2024 to 43.3% in FY 2025. Management decided to lift sales prices only once during the financial year to offset the margin impact of the Thai baht after a number of price increases taken in FY 2023 and 2024. We note, though, that the company has already taken another price increase in the first half of FY 2026. Employee expenses increased 10.4% for the year. This reflects the 18.1% increase reported in the first half of financial year '25 and a 3.1% increase in employee expenses in the second half of financial year 2025. The increase reflects market adjustments to retain key roles, including fitting technicians, the introduction of a long-term incentive plan and the addition of strategic roles in the U.S., the Australian aftermarket, businesses acquired and the development of the Australian e-commerce platform. Depreciation increased 4.1% or -- beg your pardon -- increased $4.1 million or 14.3%, reflecting the capital expenditure program in recent years and the impact of lease accounting, recognizing depreciation on the right-of-use assets. Advertising expense increased $2.9 million or 34% as the company increased its digital advertising presence in Australia, the U.S. and the U.K. markets to drive brand promotion and e-commerce presence. Occupancy cost increased $1.8 million or 10%, with a larger warehouse leased in Texas to facilitate the U.S. Toyota contract; new sites, including the sites of the 3 businesses acquired during the year; and an increase in power costs around the world. Equity accounted share of losses relates to ARB shareholdings in ORW and NACHO lights. At the time of ORW's acquisition of the 4 Wheel Parts business, it was in Chapter 11 bankruptcy and making significant losses. ORW and ARB moved quickly to restructure the business and improve performance. The 11 original ORW stores and the acquired 42 4 Wheel Parts stores have now been rationalized to 48 stores with 3 stores closed due to proximity and 2 stores closed due to performance. Management and the Board are very pleased with early progress, and the performance of the combined ORW-4 Wheel Parts business to date is well ahead of expectations and the original business plan. ORW, importantly, achieved small operating profits in 5 of the last 6 months of FY 2025, and the business is generating cash again, well ahead of the original business plan. NACHO Lights continues to grow and develop its product range as a startup company. Other expenses increased 7.8%, driven by IT costs related to security, licenses and protection software, and also due to compliance costs, including the preparation for next year's disclosures around the sustainability. We've called out, at the bottom of the slide there, 2 nonoperating transactions realized this year. The reported profit before tax includes $3.6 million of realized profits on the sale of 2 retail sites and $1.3 million of acquisition-related costs, including ARB's equity accounted share of ORW's acquisition cost to acquire 4 Wheel Parts. Overall, the company reported profit before tax of $134.9 million, declined 4.6% compared with the reported profit before tax of $141.4 million. On to Slide 10. We see that inventory levels increased 3.9%, slightly below the sales growth of 5.3%. Management made a concerted effort to reduce inventory levels during the second half of FY '25 after inventories had increased $38 million or 15.8% during the first half of FY '25. We note though the increase in inventory includes the impact of the weaker Australian dollar and the acquisition of the 3 businesses being ARB Toowoomba, MITS Alloy and the [ Stockist ] in Christchurch, New Zealand. Cash flow from operations broadly equal profit after tax plus depreciation with working capital increasing only marginally from last year. Our cash flow from operations generated $128 million cash for the full financial year. The company spent this cash in a number of ways, including investing $46.2 million in property, plant and equipment, of which $23.3 million were spent on property and $22.9 million were spent on plant and equipment. The company paid $23.5 million in fully franked dividends during the year. This cash payment related to FY '25's interim dividend paid in April '25, noting that the company underwrote the FY '24 final dividend, which was paid in October 2024. The company has also announced a special fully franked dividend of $0.50 per share. This special dividend will be fully funded out of existing cash reserves and paid in the first half of September. The company has also announced a final fully franked dividend of $0.35 per share, which will be paid in October, and this takes the total dividends for FY '25 to $1.19 per share, which is up 72.5% on last year. The company invested a further $25.6 million in its long-term strategic investments in the U.S. The investments facilitated ORW's acquisition of the 4 Wheel Parts business, including its retail store network and e-commerce side. And ARB also injected further funding into NACHO Lights, along with other shareholders of that company. At the end of the financial year, the company had $69.2 million in cash and had no debt. I appreciate your attention on the call this morning and hand the time back to Lachlan.

Excellent. Thank you very much, Damon. What you're seeing on screen here is just a quick video as to where some of our investments have gone. And so this is our Kilsyth redevelopment. On the screen is our new head office complex, which was completed at the commencement of this year. We entered this site in 1999, and we've been in quite an antiquated site for quite a period of time. And the Board had agreed to upgrade the site, which include everything you can see on the screen. In addition to the upgraded head office, we also have a new retail store, which I'll speak to through the course of my presentation. And then lastly, down the back is an upgrade to our engineering facilities also on site. And we also -- whilst not in the presentation, we also took the time to upgrade the facilities of the manufacturing operation for our manufacturing employees shown here on screen as well. Let's start with a look at the Australian vehicle sales and those core to ARB's business. This was in a regular year with a number of newcomers to the Australian 4x4 pickup car park as well as a slowing of a couple of key models. In aggregate, ARB's A-class models declined material from FY 2025 with sales of the top 3 pickup vehicles, the Ford Ranger, the Toyota Hilux and the DMAX 44, as Damon mentioned, declining by 17% each. Whereas in FY '24, these models grew by 35%, 15% and 32%, respectively. Additionally, Land Cruiser 70 Series declined by 12%. And the King of the Road, the 300 Series Land Cruiser declined by 27%, which is more likely related to supply than demand with a model upgrade during the middle of the year. There are a couple of standouts in the 4x4 SUV class with the Ford Everest had another strong year with 33% growth following 88% growth in the prior year. And after an anemic year with a constricting model change, the Land Cruiser Prado bounced back with 28% growth. Not represented in this graph are the newly entered BYD Shark and [ Kia Tasman. ] The jury is still out whether the buyers of these new models will invest in accessory upgrades. But despite this, the ARB BYD products is available to order, and the Kia Tasman is proudly being worked on at the moment in our engineering center. Looking forward, ARB is very excited for the imminent release of the Ford Super Duty, which is due to arrive in the coming months. We believe this is going to be a prolific model, both through fleet and retail channels. And additionally, we're expecting an update to the new Toyota Hilux in the new financial year. Moving on to the domestic and international sales. ARB's aftermarket business in Australia is comprised of sales through corporately owned stores, independent ARB stores, stockists and various forms of wholesale resellers and new vehicle dealerships and fleet. Also included in these numbers are ARB subsidiary businesses GoActive Outdoors representing Tools Sweden Kingsley Enterprises, SmartBar in South Australia and the newly introduced MITS Alloy business in Newcastle, New South Wales. As reported by Damon, the Australian aftermarket business was flat to prior financial year. Given the material reduction in A-class vehicles, we believe this is a strong result and one where we have grown market share in key models. Impacting the result, however, was the decline to our subsidiary business, which, in aggregate, negatively impacted the overall result. The flagship store development program remains a strategic focus. In the 2025 financial year, we saw the introduction of 5 all-new flagship sites in addition to 4 store upgrades. This exceeds our previously reported growth target for new stores. To help reconcile the store numbers, we did sell a very small branch operation in Burnie, Tasmania in the 2025 financial year. Important to note, though, that when we do upgrade a store, not put in an all new store but upgrade store, we typically add fitting capacity. And on average, across those upgraded sites, we had an average of 3 additional fitting bays per store, which increases capacity depending on access to fitters and obviously demand as the Australian aftermarket business now represents 55.2% of group revenue. Despite its historically strong performance, the Kilsyth head office showroom was our proudest example of a retail representation. But along with the site development we just presented, we have an all-new 475 square meter flagship showroom in the head office. Now on site is the most contemporary version of an ARB retail representation for our enthusiasts and trade customers. Additionally, this site also gives a much better representation of product and brand journey to the corporate customers that visit ARB's head office. And critically, Kilsyth also provides an opportunity for our marketing and visual merchandising teams to explore new and different ways to showcase ARB product and the brand, obviously, for roll out to further stores where we see appropriate. Coming down and a big call out to Ben and Clayton formally of Make Tracks 4x4 long-term stockists to build a stunning flagship ARB showroom in Rockingham WA -- welcome to the family, guys -- and to our long-term store owners, the Black family in Newcastle; and to Nick Manell in Penrith, New South Wales, thank you for your efforts in upgrading your stores. They look absolutely stunning. Now on to the national sales and fitting performance. The 2025 financial year national sales yielded mixed results, excluding subsidiary businesses -- or my apologies. Sorry, yes -- excluding subsidiary businesses, we achieved low single-digit growth. The ARB corporate retail business performed well, offset by declines in our wholesale business through independent ARB stores and stockists who both grew in confidence in ARB inventory during the year, but also took a more conservative position on their stock management and watch their cash. The dealer channel naturally declined with lower new vehicle sales. However, the ARB fleet business continued to trend over recent years with strong growth. The significant effort to improve engagement and performance in ARB's workshops is an ongoing effort. The total number of feeder employees in the period actually declined, which did impact sales performance. In aggregate, however, turnover reduced and retention improved. Initiatives in all aspects of employment and retention of our fitters continue. However, the most consistent and reliable addition to the team have been our employees on skilled migration visas. We have 12 new team members now actively working in ARB stores, 10 new employees imminent for arrival and a further 12 employees joining the next 8 to 12 months. Customer satisfaction at ARB store is a critical aspect of the business' success directly impacting customer retention, loyalty and overall profitability. NPS, or Net Promoter Score, is a commonly used means to measure customer satisfaction. The ARB corporate stores are now measuring NPS, and in the last 12 months, we've had 8,000 customer responses from specific transactions, reflecting a 24% response rate. Pleasingly, ARB's NPS score is 68, which, by industry standards, is excellent, representing high levels of customer satisfaction. With that, however, we have individual store -- stores which ranked much higher than 68 and stores obviously ranked lower, which will remain our focus. The Ford Licensed Accessory program is where ARB has partnered with Ford Australia and Ford Global to deliver in excess of 180 ARB-branded accessory products for the Ford Ranger and Everest platforms available through 4 dealerships with a full 5-year warranty. On dollars per vehicle basis, the FLA program grew in 2025 financial year. However, on a total revenue basis, the FLA sales declined as a result of the 17% reduction in Ford Ranger sales. All aspects of dealership ordering systems, dealership merchandising, new product additions are being actively worked on and enhanced through the program. Both Ford and ARB are excited about growth in FY 2026 with the addition of the plug-in hybrid Ranger as well as the previously mentioned Super Duty which, if I didn't make it clear before, we genuinely believe this customer sits in the bull's eye of the ARB demographic. I'm very happy with the program and continue to look at opportunities at both sides to enhance the program, not only in Australia but offshore, especially in New Zealand and the Middle East. And we are in the final stages of a 5-year extension to the FLA program, which will see us out to 2030 and hopefully beyond. And now on to the export business. ARB's export business was clearly the highlight of 2025 financial year and really demonstrates our diversity and revenue resilience. Asia, New Zealand and the Pacific Islands recorded increases of revenues of 15.3%. Europe, Middle East and Africa performed well in challenging environments, growing at 12.4%, noting that the trucking revenues were flat-ish with marginal growth for last year despite a 6% decline in total pickup vehicle sales in the U.K. We are delighted with the U.S. result, as reported by Damon, with North America and Latin American sales growing by 21.4%, which is a fantastic result, especially given the political and economic headwinds we all read about in the news daily. Export sales channels now represent 36.6% of group revenue. On to some specifics in markets outside the U.S.A. The New Zealand aftermarket returned a great result, growing 22.5%. Important to note that this excludes sales from manufacturing business, Proform Plastics, which its sales are mainly in the company. Our previously announced Hamilton flagship store development, the acquisition of Peter Munro Commercials in Christchurch and our continued investment in the ARB brand in New Zealand is bearing fruit, which is great. Turning to the Middle East, and ARB is now in our third site expansion from the original 1,500 square meter DC to the newly built corporately owned 5,000 square meter site in the Jebel Ali Free Zone in Dubai. Since 2016 when ARB first introduced our corporate office in Dubai, the business has gone from strength to strength. From a modest base, the -- our DC sales, we grew 45% in the financial year, and we are confident for this to continue in the 2026 financial year. The thorn in the side at the moment is China, and China remains an incredibly exciting opportunity for ARB with a range of current challenges that have caused consistent year-on-year revenue reductions for the business. We must arrest the slide of declining sales to the market and resume control of ARB's destiny. Despite our challenges, the brand remains very popular amongst the Chinese 4x4 community. To rest the slide and with the support of Chinese-based tenured employees, ARB has established a wholly owned foreign enterprise, or a WOFE, in China to import, market and distribute ARB products. This entity has only just been established and will only commercially mature in the second half of FY 2026. Now on to the U.S. business. While we've been laying the strategic foundation for growth in the U.S. for a number of years, the results haven't necessarily materialized. But this year, they did. And as such, we're delighted to see the excellent growth from the U.S.A. of 21.4% in FY 2025, especially given the current market dynamics. All channels performed well and -- which I'll speak to shortly. But a brief mention to our Latin American business, which has again outperformed year after year. The e-commerce business had a full 12 months of trading and made strong contributions to the result. We continue to tune the e-commerce business as it matures, and we learned how to digitally optimize specific product groups and regions. Recently, we added a program called Locally, which provides an opportunity for brick-and-mortar wholesale customers to fulfill ARB e-commerce orders, particularly where there is a requirement for the ARB product to be fitted. Our engineering center is now in full swing. The small team is connected with the Australian engineering team and are busy on range expansion to popular U.S. models, especially those built by Toyota. The team are also supporting the product validation from our impending pause in Spider release. Early days, but the localization strategy seems to be working with impressive sell-through of those parts, which the U.S. engineering team have helped expedite to market. And on further good news, I'll now go through ORW and 4 Wheel Parts. Off Road Warehouse is a joint venture that originally had 11 4 Wheel Parts accessory retail stores in California and acquired a further 42 stores in October 2024 across 9 U.S. states for a total of 53 stores. The 4 Wheel Parts business, as Damon mentioned, was acquired out of Chapter 11 bankruptcy. In the 8 months of trading, ORW, 4 Wheel Parts are successfully integrated over 500 employees to the business; transitioned an ERP system; closed a total of 5 stores, 3 of which were geographically close in the other 2 stores underperforming. The business now has a total of 48 stores, which we've restructured -- and we've restructured a loss-making e-commerce business back to profitability. And as a result of all of this, the business has achieved small operating profits in 5 of the last 6 months. And as Damon mentioned, is significantly outperforming the original business case. As at 30th of June 2025, ORW has a positive cash balance of USD 7.7 million and has repaid the ARB debt in full. This puts us in a great position for growth. A lot of work still needs to be done in the original business as many organic opportunities still exist. However, we're off to a great start. A strong shout out to Greg Adler and the team on a job very well done so far. But a lot of exciting times ahead. A lens now into ARB products through the ORW 4 Parts channels. And again, it's a good news story where ARB products have achieved excellent sales through this channel. ARB product exposure and education through both retail and e-commerce sites have significantly improved. On a like-for-like store basis, ARB product sales through ORW and 4 Parts are growing very well, in some months up to double the corresponding period. Store in-store ARB displays as the first trials are now going to 2 stores. After a thorough review of the pilot program, ARB will roll out these displays in the remaining stores. And it's a pleasure today to just share a quick reel for those of you who follow the 4 Parts socials. You may have seen this, but this one is hot off the press. It's only 90% finished, but the first store in Gardena next to the new ORW 4 Parts head office is just finished a couple of days ago, but I thought it would be worthy to share today. So you'll just see a quick video of the store in-store display in Gardena L.A. [Presentation]

Okay, on to ARB's OEM business, which recorded -- which had a record year in FY 2024 with sales revenue just shy of $60 million, representing 44.5% increase. In FY 2025, revenues were flat to prior financial year and represents 8.2% of group revenue. This result numbers exclude the business and sales to Toyota U.S.A. Looking forward, sales to OEM customers expected to decline in the first half of the new financial year, but expected to recover in the second half with a small increase in the full year, largely dependent on new vehicle sales in this time, which we have some visibility to from OEMs, but they are all ultimately forecast from OEMs and can somewhat be unreliable. New contracts to Toyota USA will be announced in FY 2026, hopefully at the AGM. The wheels are now in motion on the Toyota, Trailhunter, a defining partnership for ARB in the U.S. market. This partnership represents Toyota's vision of future growth in the overlanding market and also their belief in ARB as an overlanding partner of choice. In late April last year, ARB commenced the supply in limited volumes the products of Toyota Tacoma Trailhunter through a combination of in-line, port-installed, dealer-installed accessories. These accessories included ARB-branded rear bumpers, recovery points, bed racks, sports bar and suspension. And more recently, Toyota launched the 4 Trailhunter, which includes an ARB-branded roof rack and suspension. Toyota has over 1,200 dealerships across the U.S.A., and feedback from this group, so far, has been overwhelmingly positive. ARB hopes the success of the Trailhunter program will lead to further opportunities with Toyota U.S.A. On to product and operations. And as always, pitches and videos are an excellent means to present new product. Unfortunately, we don't have the audio today, but we've queued up a brief reel for today's presentation to give you visibility to some of those products we've worked on in the last 12 months. [Presentation]

Excellent. And at the back end of that reel, you could see some of the video highlights from the 50th year trip. The engineering team have indeed been busy in both platform development, such as the new Toyota Land Cruiser Prado and Toyota Tundra, BYD Shark and most recently, the Kia Tasman. Not only platform but dedicated product evolution happened in 2025 financial year, headlined by the release of the brushless compressor. Already category-leading in its brushed form, the brushless compressor is a technological leap for this product that gives users a much higher air flow from the same compressor footprint, speeding up times to inflate tires after a long day on the track. In FY 2025, we also integrated MITS Alloy business to ARB and gave us a great back-of-view solution access to Australia's best 4x4 retail distribution network. The integration put the handbrake on driving sales for a few months. We're very confident MITS will be a meaningful contributor to ARB's growth in 2026. Given the significant investment and brilliantly engaging marketing campaign launched by Kia on the Tasman, ARB dedicated -- decided to release early renders of our view on how this vehicle will look once modified. We were surprised by the engagement and the diverse feedback from the ARB community to the vehicle, which both demonstrates the connectivity of ARB community and interest on how we evolve product. We can also get great strategic insights, not only for our own go-to-market and product strategy, but also provide some interesting insights for the OEMs, which they actually interestingly took up. And the final slide on our marketing content. In the earlier presentation, I mentioned the 50th year celebration -- a way of thanking employees, customers and suppliers. To do this in a manner that best represents the lifestyle of our products and the company, we prepared 9 separate trips, both in Australian and internationally that celebrates 4-wheel driving and gave us a great opportunity to explore globally iconic 4-wheel drive locations with customers, staff members and suppliers alike. And there was a quick video, but in the essence of time, I will skip through it and move straight on to the outlook. ARB's aftermarket business performed well in FY -- in Q4 FY 2025 despite challenging market conditions. The order book and order intake remains healthy despite weaker sales of those models key to ARB. ARB's export business continues to trend positively. Growth markets such as New Zealand, the Middle East and Europe performing well, which we expect to continue into FY 2026. The business is putting a structure in place to return to growth in China. The U.S. market outlook is very positive. The strategic foundation laid in prior years to grow ARB USA's business are now materializing and are sustainable. The ORW 4 Parts business is outperforming expectations and is anticipated to provide a stable growth platform for ARB product sales in FY 2026. Sales to OEMs are forecast to be down in the first half of FY 2026, but a return to growth in the second half of FY 2026 for overall small growth in the financial year. We continue to work on the OEM pipeline on both new customers and new products for future growth. At this year's AGM, updates will be provided on key initiatives, including the Australian e-commerce launch, new Toyota USA product, the Poison Spider relaunch and the ORW 4 Parts growth strategy. In summary, the Board believes the company is well positioned to achieve long-term success through expansion of the Australia, New Zealand aftermarket with new and upgraded retail stores and stockists, strategic partnerships with key OEM customers in Australia and the U.S.A.; the continued growth of ARB's export business, in particular, through owned channels in the U.S.A.; a strong balance sheet with $69.2 million of cash; a pipeline of new product developments and releases; and a well-balanced management team with a blend of long-term ARB-experienced and external executives. Before finishing up, I'd like to take the time to thank the entire team at ARB for their efforts in 2025 financial year, particularly the senior leadership team, our state management and international business unit managers. We remain very ambitious for continued growth, which comes with hard work, some laughs and some great engagement. We have a very capable leadership team that are value leaders in the organization and are motivated to contribute meaningfully to the next 50 years at ARB. Now that concludes today's presentation. We'll now move on to our Q&A session for questions raised through the chat box during the course of the presentation.

We're just preparing the questions now, and I hope to hand it straight over to Damon to start answering the questions that have come through.

Yes. Thanks, Lachlan, and I'll perhaps kick off and respond to the first few questions that have come through. And I think I'll start with the questions revolving around the margins in the second half of '25 in comparison to the first half of '25. And then questions in relation to the margins as we move forward into FY 2026. The key driver on margins has been the weaker Australian dollar in the second half of FY '25. When we started FY '25 back in July, we saw the Australian dollar was sitting at about 24 Thai baht to the dollar. Through the course of the first half, the Australian dollar weakened down to 21%, which is 3 on 24. So it's over 10% increase in the Australian dollar cost of our Thai baht factories where we produce a lot of our products. So we entered into the second half at about 21. Now the Thai baht sat stubbornly at around THB 21, dipping down to THB 20.5 at times through the second half, and it sat stubbornly at this historical low. So whilst it has dipped to THB 21 at different times over the last few years, it's only of a dip there and not set there, which it seems to have done over the last 5 -- over the last 7 to 8 months. So that's the key reason for the decline margins in FY 2025 second half. As to where we see it going in 2026, well, ARB is currently unhedged in relation to Thai baht, given the Thai baht sitting at -- or the Australian dollar at its weakest point against the Thai baht. We haven't gone in the locked-in rates, expecting it to bounce or to come back from these lows. And so we're currently unhedged. And we're -- our margins continue to be impacted by the Thai baht-Aussie dollar conversion. So we expect the margins of FY '25, second half to continue into the first half of FY '26. In terms of how we can improve those margins, really the only lever -- really the key lever we have is to take price increases, and ARB has just taken another 2.9% price increase in August earlier this month. So that will offset some of the deterioration in margin that we've experienced from the Thai baht. Our intel from FX advisers and from those that we deal with is that there's an expectation that the Thai baht will -- that the Australian dollar will strengthen against the Thai baht in coming months. But at this stage, I guess we won't speculate on that and we'll suggest that the second half margins will continue into the first half of FY '26. There's questions around the FY -- around the employee expenses, which dropped from 25% in first half to 23% in the second half. A lot of work has gone into managing the employee expenses in the second half of the financial year. We expect the second -- again, the second half ratio to sales to continue into the first half of FY '26. We have had a number of headcount reductions, particularly in relation to factory staff, both direct and indirect as we've worked to reduce our inventory levels, which, of course, has impacted on -- has impacted on our factory manufacturing levels, resulting in lower overhead recoveries through the factories in the second half, but we've sought to offset that by reducing head count. So we expect employee expenses to continue at the same level as the second half of '25 into the first half of '26. The question as to whether we're currently hedged Thai baht to Aussie dollar. No. We're sitting at -- as I mentioned earlier, we're sitting at the lowest at historical lows. So we haven't locked in, and we don't expect them to fall lower, but we, of course, can't control that. A question then around the expected range of equity-accounted losses for FY '26. We expect NACHO will continue to make relatively small losses through FY '26 as it seeks to establish its product range and its position in the market. ORW, which includes the 4 Wheel Parts business, as mentioned earlier on the call, it's made small profits in the first -- sorry, in 5 of the 6 months between January and June. We expect those profits, those small profits to continue through FY '26 as we continue to consolidate the business and to drive the cost initiatives and the margin improvements and the sales levels that we've been trying to drive over the last 12 months. So we expect our share of profits or losses from associates to be relatively marginal over the course of FY '26. Lachlan, I'll hand back to you, and I will review a couple more of these.

Yes, thank you, Damon. Okay. There's a -- surprising with -- there is a couple of fairly common theme, so I'll try to answer some of those common questions as best possible. There was just a question that has been asked around the update to the sell-out of ARB products through ORW 4 Parts. And in the presentation, I had mentioned that we saw up to 100% uplift in sales in some months. So over and above, there was, you guys are on to it. I'd obviously previously said a 25% increase, which I don't have on record, but it's well and truly north of there, which is fantastic. There was a question that actually came through just for clarification around the difference between ORW and 4 Parts sales. So the entity that acquired 4 Wheel Parts was ORW. So you can consider those interchangeably. Now on the face of some of these businesses, the ORW side, they actually still have ORW branding, but the corporate entity that owns the 4 Parts ORW business is called Off Road Warehouse. And the results that we speak of in these presentations are interchangeable and common. They're not one set of results versus another. Clearly, a lot of questions and interest around tariffs. And so one of the benefits of having access to information on the 4 Parts ORW business is that we can actually see what everybody else is doing. So we're talking in the order and it was depending on the commodity type, and it was obviously a blended rate, sort of around 7.5%, 8% price in the U.S. on ARB products through to market. And we believe that is a well-positioned number reflective of our business and something would allow us to mitigate most of the change in tariffs. On the product that we sell to Toyota North America Toyota, at this time, are paying us back in full for the tariff impact, which is fantastic. And in terms of the mix of tariffs, it's obviously a complicated -- we have a combination, depending on the country of origin, but a combination of the steel and aluminum tariff, the automotive tariff and the reciprocal country tariffs, which is a bit of a moving feats. And so I think the best way to answer the questions that are coming through that we believe that we've largely mitigated the tariffs. The only tariff that at the moment, we believe is stackable is from China. And we've done everything we can to resource and move whichever products we had been built in China outside of China, but conscious that the majority of the products flying into the North American business are either made in Thailand or made in our Australian factories, which really helps and gives us a -- puts us in a good position. Okay. Now there's a lot of questions about the first period of trading in 8 weeks, which I'm going to respectfully avoid. So the question was, I appreciate ORW is profitable in 5 out of the 6 months, but what about 4 Parts? That question is answered by saying that they are interchangeable. So consider ORW and 4 Parts one. And that consolidated entity was profitable in 5 out of the 6 months. A great question on the Zenith Bar. Thank you to that question coming through. How has it been received? Are you finding it's an opening for a new customer segment that maybe after something more aesthetic. But we firmly believe that the user customer, which is most of the people driving outside metropolitan cities around Australia, actually needs the protection. And certainly, the demand for our product reflects that. The Zenith bar, we think, is highly stylized bar that was originally designed for international markets, but we've adapted it here to Australia. I certainly wouldn't say that it's the majority of the customer base. The majority of our customers actually realize that they do need a full bar protection, but there is a demographic that takes that. Sales have been very strong so far, right? But certainly, the leading product in our lineup is the Summit Mark 2 Full Bar. And another great question that's come through with respect to our dealer services business. So there's a lot of exciting initiatives. One of the initiatives I haven't spoken about is our DSI business through 4 Parts ORW. So DSI have around 15 to 16 dedicated employees that are in close proximity to the stores, and what their job is to go out to car dealerships in the U.S., present our product offering, both ARB and non-ARB products, and create work for the workshops within the 4 Parts ORW business. And that business is going from strength to strength. There are a lot of vehicle outfitters in the U.S.A. Graphically, after they've upfitted the vehicle, they have to move them around. One of the benefits of our ORW 4 Parts locations across the 48 sites is that we can do that work and be close to the dealership so people aren't paying for vehicles to be shipped around. And there's just one final question about what portion of the export business did sales to Toyota make up. And thankfully, due to our contractual relationship with Toyota, I don't have to answer that.

Lachlan, maybe one for you here. It's -- can you talk to which new vehicle models excite the team? And whether the BYD Shark is something that should be tracked?

We will track it at some stage. We understand the volumes of vehicles. The jury is out, absolutely. It's an interesting -- it's a very interesting model. And the question that I've consistently spoken to is whether or not a customer who's buying a lower-priced pickup vehicle is going to invest in accessories for their vehicle. We've had products for the BYD Shark available for a little while now. And the initial take-up has been limited for the volume of vehicles out in the market. And certainly, from a car park-driving-around-the-road standpoint, you actually see a lot of unmodified BYD Sharks. Maybe that will change. Maybe that's the aftermarket picking up. We're hopefully not stupid enough to say that there's not a market there. And I think the reflection of our movements to design and develop product for that vehicle tell a story about we see that they could or should be opportunity there. But at the moment, it's a real watch and see. The build quality of the BYD Shark, in some aspects, is questionable for who want to use that vehicle for genuine off-roading as is the payload. And so it's a watch at the moment. And I think it's probably just a bit too early to tell.

Okay. Lachlan, I'll just take a couple of questions here and then you can never look at whether we close out. Question is whether the ORW repayment of debt to ARB required them to take a loan to repay the debt. And the answer is no. ORW is cash positive, which includes the 4 Parts business, as Lachlan mentioned just a minute ago. ORW is generating cash. It's cash positive. It had $7.7 million cash at the end of June '25, and it has no external debt. And then there's a question around whether the number of fitters declining in Australia is a leading indicator of lower volumes or a function of the clearing of the order backlog. Well, the answer is we can't get enough fitters. It's an industry-wide problem, not just an ARB problem. It's an industry-wide problem. We can't get enough of them. There's not enough fitters to satisfy all of the demand across the industry. And so we're looking overseas as are many other players in our market for -- to bring fitters into Australia to try and increase the supply of our technicians in Australia. Our sales order intake levels are still at high levels, record levels really. And so yes, there's a strong demand for fitters rather than it being an indication that volumes are dropping.

Yes. That's not a reflection of the demand. And certainly, if we had more fitters, we think more we would have achieved a better result last year. But it seems to be the piece of the puzzle that we can't quite get to drop in this market, but it's a constant focus for us. Excellent. Well, to everybody on the call, thank you very much for taking the time to join us this morning. We hope the presentation was interesting. And no doubt there will be more questions coming through in the next 24, 48 hours. Enjoy your morning. And if you have an opportunity, jump online, have a look at the 50th year celebration videos. We think they're fantastic. We recently dropped a video on South Africa, which is a real interest point. But again, have a great day, and thank you very much for joining today's presentation.