Promising ring for future dividend payments at Bell

INVESTORS in Bell Equipment can look forward to continued dividend payments and may even be rewarded more handsomely in future.

The global manufacturer of heavy equipment for the mining and construction sectors on Thursday lifted its eight-year suspension on dividends, citing improved cash flows that had increased profits.

Bell declared an interim dividend of 15c, its financial report for the six months to June, released on Thursday, showed.

CEO Gary Bell said cash flows had been positively affected by the reduction in inventory across its global operations during the period, as well as right-sizing and cost-cutting.

Bell generated a healthy cash flow of R150.96m in the interim period. With major capital expenditure out of the way — namely the upgrade of its ESeries Dump Trucks — Bell said there would not be too much demand on cash in the medium term, freeing up resources for the continuation of shareholder rewards.

“It is our intention to continue payment of dividends and grow the dividend over a period of time,” Bell said.

The company has not paid an annual dividend since 2008.

The positive news on the dividend halted the 11.76% decline in Bell’s share price since Monday, when the company divulged further details on the extent to which fraud and mismanagement at its operations in the Democratic Republic of Congo (DRC) had hurt profits.

The company’s shares closed flat at R10.50 on Thursday.

Bell reported a 24% decline in headline earnings per share to 67c. Profit for the year declined by a similar margin to R64.28m. Had it not been for the scandal in the DRC, the first half would have shown improved profitability, the company said.

Misrepresentation of revenue, inflated inventory valuations and collusion are just some of the reasons the company dismissed its entire senior management team in the DRC.

Gary Bell said five senior managers in DRC had been dismissed when a forensic investigation uncovered fraud in the first quarter.

“Since then, we have dismissed about seven employees and there is probably a few more still to go as we tidy up.”

The company employs about 250 people in the DRC.

Despite the problems in the DRC, Bell said he was confident it had a handle on the situation and that the division would be monitored closely.

In the interim, a team had been sent from SA and the group’s other African operations to ensure continuity of service delivery to clients.

Bell’s operations in the rest of Africa were also hit by the decline in mining activity.

For the past three years, machinery statistics indicated the African market had shrunk 30% year on year, the CEO said, as miners delayed capital projects in the low pricing environment and sweated their assets. Profits would continue to gain support from buoyant construction activity in the North American and European markets, excluding Eastern Europe, which had little exposure to the mining sector, he said.

Bell derives 60% of its profits from outside SA.