WangChung, I'm not sure what you mean by "pain (experienced by...

WangChung, I'm not sure what you mean by "pain (experienced by ARP) when steel prices were going through the roof a couple of years ago."

I suggest the pain was perceived more than real.

As case in point, let's have a look at the margin experience (at any level of the P&L...gross profit, EBITDA, or EBIT) during that period (2004-2006) of a near-quadrupling in steel prices.

Lets start with gross profit margins over the periods from 2003 to 2007, which spanned that steel price spike:
DH'02: 51.4%
JH'03: 52.2%
DH'03: 52.9%
JH'04: 52.8%
DH'04: 51.9%
JH'05: 51.8%
DH'05: 52.1%
JH'06: 51.2%
DH'06: 52.1%
JH'07: 52.6%

Undeniably stable, I'm sure you'll agree. In fact, if you landed on earth for the first time from Mars knowing nothing about the steel market and you saw that sort of gross profit margin stability and someone told you steel prices had soared over that period, I wager you'd swear that steel was a not major input into ARP's manufacturing process.

Similar for EBITDA and EBIT margins:
EBITDA Margins:
DH'02: 19.8%
JH'03: 20.6%
DH'03: 20.3%
JH'04: 20.7%
DH'04: 19.6%
JH'05: 20.8%
DH'05: 19.8%
JH'06: 19.8%
DH'06: 19.7%
JH'07: 20.0%

EBIT Margins:
DH'02: 16.4%
JH'03: 17.1%
DH'03: 16.5%
JH'04: 16.1%
DH'04: 16.1%
JH'05: 17.0%
DH'05: 16.8%
JH'06: 15.8%
DH'06: 15.7%
JH'07: 15.0%
(Note that the reason for the EBIT margin fade in the latter part of the period under review is due to the increase in the depreciation charge following the commissioning of the the manufacturing plant in Thailand...it warrants noting that EBIT margins have since climbed as follows:
DH'07: 16.2%
JH'08: 16.9%
DH'08: 16.8%
JH'09: 17.6%
DH'09: 19.1%
JH'07: 20.2%)

I think the exercise demonstrates quite forcefully ARP's pricing power and its ability to pass on increases in input prices.

In fact, despite these unrpecedented rises in steel prices, ARP's period-on-previous-corresponding period operating earnings have never gone backwards. And I think that's a huge statement about the quality of the business, because there are very few companies that can match that sort of achievement.

Like I said, I think the "pain" of steel price concerns was all in the minds of the analysts and brokers who failed to fully understand and appreciate the business.

I remember all the wailing and gnashing fo teeth at the time. It proved to be a great buying opportunity.

In case you can't tell, I am a HUGE fan of ARB!

Regards and prudent investing

Cam