Maxiparts Ltd (ASX:MXI) (FY 2026) Earnings Call Highlights: Record Cash Position and 55% ...

Negative Points

• The business experienced a significant step back in market activity during March due to the Iranian conflict, which caused uncertainty and impacted diesel pricing, affecting customer demand.

• The company faces ongoing market uncertainty from broader global and national events, which could impact future performance.

• The Forch Australia business, while growing, is still relatively small compared to its largest competitor, which has revenue north of $180 million, indicating a need for continued investment to gain market share.

• The company expects to incur some working capital investment as it grows, which could temper the recent improvements in cash flow.

• The Japanese parts program growth is gradual and requires continued investment in product development and cataloging, with no immediate step change expected.

• The company anticipates supply cost increases due to inflation, which may require passing on price increases to customers, potentially affecting demand.

• The new store expansion is subject to site, lease, and staffing considerations, with only one store expected to come online in the first half of FY27, and a second potentially by year-end.

Q & A Highlights

Q: Regarding the inventory optimization through the year, do you think there is further room for improvement into the next year? A: Peter Loimaranta (CEO & Managing Director): We believe a bulk of that improvement was achieved in the second half. We expect the ratios between inventory, working capital, and revenue to now maintain moving forward. As the business grows, there will be some working capital investment, but it will be at the percentage rates we finished the financial year at on a material level.

Q: In terms of new stores and broadening your footprint, what is your view for the expansion of new stores over the coming year ahead? A: Peter Loimaranta (CEO & Managing Director): We are working through active projects for store expansion. We expect a new store to come online towards the end of the first half, with a potential second towards the end of the financial year. While we may not replicate the exceptional returns from Kalgoorlie, we see it as a quicker-than-normal payback market.

Q: Can you give shareholders an outlook on the Forch business over the next few months, given its strong growth in the mining sector? A: Peter Loimaranta (CEO & Managing Director): The business is extremely mature, with just over $23 million in revenue for FY26, while its largest direct competitor is north of $180 million. We have been gaining share and expect that to continue. Growth comes from expanding sales areas and leveraging the group relationship with Maxiparts to secure larger multi-site customers.

Q: How do you see the landscape in terms of both organic growth and external M&A opportunities? A: Peter Loimaranta (CEO & Managing Director): We aren't a business that acquires for the sake of it; acquisitions need to make strategic and financial sense. We have a strong focus on organic programs like network expansion, the Japanese parts program, and Forch. However, we also see opportunities to add strategic and financial acquisitions that make sense now, and it remains a strong part of our future growth platform.

Q: Can you discuss the opportunities available for the Japanese parts program, and does it leverage existing infrastructure or require more investment? A: Peter Loimaranta (CEO & Managing Director): It is more of an evolution. We have been developing the product offering, cataloging, and supplier base for years, and Eddie Hanaphy becomes a key part of driving it forward. We are still at the smaller end of the market compared to competitors, so we see this as a multi-period, higher-than-traditional growth project.

Q: Industry commentators have observed a rebound in Q1 in the heavy commercial space with price rises sticking. Is this something you are seeing across the board? A: Peter Loimaranta (CEO & Managing Director): We have been seeing supply cost increases and generally pass them through as they come. The industry has stabilized a bit in pricing, with some inflation coming through this calendar year. It's not at the rates seen post-COVID, but it has increased slightly based on larger global events.

Q: What is it that's exciting you for the business of Maxiparts for the year ahead? A: Peter Loimaranta (CEO & Managing Director): We go into the new financial year with solid momentum. The market has stabilized after the March setback. We have the financial and management capacity to accelerate projects like new sites and growing the Forch and Japanese businesses, as well as finding the right strategic bolt-on acquisitions. We believe we can increase capital distribution while achieving accelerated growth.

Q: Can you elaborate on the financial performance drivers for FY26, particularly regarding margin expansion? A: Anu Parikh (CFO & Company Secretary): Revenue grew by 2.7% to $7.3 million, with growth from all segments. EBITDA grew faster than revenue at 5.5%, with margin expansion of 30 basis points to 10.5%. This was driven by disciplined pricing strategies, cost management, and a favorable mix shift towards higher-margin areas like the Japanese product range and Forch.

Q: What were the key highlights regarding the balance sheet and cash flow for FY26? A: Anu Parikh (CFO & Company Secretary): We ended the year in a net cash position of $7 million, an improvement of $14.2 million from the prior year's net debt. This was driven by working capital strategies and operating earnings. We achieved a cash conversion of 118%, paid down $6 million in debt, and maintained a capital-light model with only $1 million in CapEx.

Q: Can you provide details on the dividend distribution and capital management for FY26? A: Anu Parikh (CFO & Company Secretary): We progressively lifted the dividend payout ratio from 40% to 50% at the interim and 60% at the final dividend. We declared a fully franked dividend of $5.46 per share, bringing the total for FY26 to $9.61 per share, a 55% increase on the prior year, representing a dividend yield of 6.7%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .