This morning ARB Corporation Limited (ASX: ARB), which designs, manufactures, distributes and sells high-quality four-wheel drive vehicle accessories and light metal engineering works, reported its half-year results to the market for the period ending December 31 2015.
For the period sales increased by 7.8% year-over-year to $177.498 million and net profit was up by a fantastic 14% to $23.328 million, or 29.47 cents per share.
Despite the great performance management appeared disappointed by this increase in sales, calling it "respectable". I think they're being very modest there, and have put in a great six months. The market appears to be pleased with the results and the shares opened the day around 1% higher.
Management pointed out that due to an unusually large number of new vehicle releases worldwide such as the Nissan Navara, Mitsubishi Triton, an updated Ford Ranger, Toyota Hilux, Toyota Foretuner, Ford Everest and finally the updated Toyota LandCruiser 200 Series, sales growth was hampered.
With so many new releases the company has found it impractical to supply a full range of accessories in a timely manner. The good news is that its product development and manufacturing teams are catching up now, and management believes they should be better positioned in the second half.
An increase in the amount of four-wheel drive vehicles on the roads does create a strong revenue stream for the company in the next few years, which I find to be very promising. As is the fact that all segments of its business grew sales during the period. This type of performance is fantastic and a key reason why I think ARB is a great investment.
Thanks to a lower Australian dollar and the quality of its products, exports rose by 15.1% year over year. I expect this level of growth to continue, and perhaps even accelerate in the second half as it starts to benefit from the new vehicle products hitting the market. Exports currently account for 23.9% of total sales, up from 22.3% last year.
One other point to make is that the company has zero debt. When looking for investments I have a preference for shares with little to no debt. ARB certainly passes this test, and is in a position to react quickly to make acquisitions that are accretive to earnings.
Management has advised that the first six weeks of 2016 have started strongly, and despite supposed economic slowdowns occurring around the world, demand for its products remains strong.
Foolish takeaway
I have previously considered ARB as a buy, and continue to stand by this today. I expect the second half of the year to offer even greater levels of growth that should provide its shareholders with strong gains.
