ARB shares are crashing 15% today. What’s spooking investors?

Shares in ARB Corporation Ltd (ASX: ARB) are under heavy pressure on Tuesday after the 4WD accessories giant released a half-year trading update.

The ARB share price is down a sharp 14.89% to $27.50, extending a tough run for investors. The stock is now down roughly 30% over the past 12 months, pushing it back toward levels last seen in 2023.

So, what did the company say, and why has the market reacted so harshly?

Revenue slips despite export growth

ARB revealed that unaudited sales revenue for the six months to 31 December 2025 came in at $358 million, down 1% on the prior corresponding period (pcp).

The result reflected weaker domestic conditions, partially offset by strong growth offshore.

Australian aftermarket sales declined 1.7%, reflecting softer demand for key vehicle models and ongoing fitting capacity constraints. At the same time, OEM channel sales in Australia fell sharply, down 38.2%, largely due to the timing of OEM contracts and model releases.

That weakness was offset by continued momentum in international markets. Export sales increased 8.8%, with sales into the key US market up 26.1%, highlighting the growing importance of offshore demand to ARB’s earnings mix.

Profit takes a hit

The bigger concern for investors sits at the earnings line, where margin pressure and softer domestic conditions weighed on results.

ARB expects to report underlying profit before tax of approximately $58 million for the half, representing a 16.3% decline compared with the prior year.

Management pointed to two key factors behind the drop. Gross margins were squeezed by a weaker Australian dollar against the Thai baht, increasing manufacturing costs. In addition, lower factory overhead recoveries followed elevated inventory levels in the pcp.

The company also flagged several one-off items during the half. These included a $1.3 million pre-tax gain on a property sale, partially offset by $2.2 million in goodwill impairment costs linked to the termination of the Thule distribution agreement.

Balance sheet still rock solid

Despite the profit downgrade, ARB’s balance sheet remains a clear strength.

At 31 December 2025, the company held $59.4 million in cash and no debt, even after paying a 35-cent final dividend and a 50-cent special dividend during the period.

That balance sheet strength gives ARB flexibility as it navigates margin pressure and softer domestic conditions, while continuing to invest in offshore growth opportunities.

Is the sell-off overdone?

Today’s reaction suggests the market is increasingly focused on earnings risk and the outlook for margin recovery in the near term. That concern is clearly understandable given the profit downgrade from management.

However, ARB remains a high-quality brand with growing export exposure, a debt-free balance sheet, and long-term leverage to global 4WD and off-road demand.

With the share price now well below its 2024 highs, investors will be watching closely when full half-year results are released on 24 February to see whether margins begin to stabilise.

For now, sentiment toward ARB has clearly turned negative, and the shares remain firmly in the penalty box.

The post ARB shares are crashing 15% today. What’s spooking investors? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation. The Motley Fool Australia has recommended ARB Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.