Bell wants to start plant in US
Decision to go ahead with US production facility should be taken by June
LISTED manufacturer of heavy equipment for the construction and mining sectors Bell Equipment is considering establishing a manufacturing plant in the US.
However, chief executive Gary Bell said the opening of the plant in the US would not have much impact on jobs in the company’s South African operations.
Bell said the facility would operate in the same way as the group’s manufacturing facility in Germany, with most of the manufacturing “bits” and components exported in containers from its South African operations.
He added that with the group’s objective of growth in North American sales, it was prudent to investigate the feasibility of setting up a production facility in the US to allow better flexibility and a quicker response to improve customer experience and support additional market penetration in that region. Bell said they were currently exploring all the costs and cost benefits of establishing the plant in the US.
He said the company was likely to finish its investigation and have taken a decision on whether to establish a plant in the US by June. But it would take a further 18 months once it took a decision to proceed to get the plant operational in the US.
Bell stressed that for Bell Equipment’s core product, 50 percent of the world market was in the US. Bell Equipment in 2013 reported its re-entry into the lucrative US market after more than a decade, resulting in a further 200 people being employed at its Richards Bay manufacturing plant.
A joint venture with several renowned US construction investors resulted in the creation of a new business, Bell Trucks America, which was responsible for the distribution of Bell trucks into that market and the establishment of a franchised dealer network.
The return to the US market followed the termination of a licensing arrangement with John Deere in which Bell Equipment provided articulated dump-truck technology to the US market under the Deere brand.
Bell said at the time the company was getting a licence fee from John Deere, but this was small in value in terms of its entire operation, adding the most important aspect of its re-entry and expansion into this market was the annuity income that came from parts and service. The target then was to obtain a market share of about 10 percent to 15 percent, which translated into sales of about 5 000 units a year.
It was anticipated that Bell Equipment’s turnover and profit would increase by an additional 20 percent to 30 percent over the following five to 10 years because of its re-entry into the US market.
Bell Equipment’s North American operations in the year to December contributed 6 percent or R363 million towards total group revenue of R6.0 billion in the year to December and 16 percent or R24.2m of total group operating profit.
Bell said ADT sales volumes in North America in the year to December were disappointing but there were delivery delays into this market.
He said administrative compliance weaknesses that had caused the delays had been identified and attended to and should not disrupt any further deliveries into this market.
Losses totalling R140m in the year to December from theft, fraud and misrepresentation by Bell Equipment’s entire management team and several other employees in its DRC operations knocked group earnings in the year to December.
Headline earnings a share was 7 2 percent lower at 39 cents compared with 138c in the prior year.
Shares in Bell Equipment closed 1 percent lower on the JSE on Friday at R13.86.