ELB expects big earnings boost
ELB Group’s agreement to be the South African distributor for the global Belaz range of heavy haulage trucks is expected to have a “substantial effect on our earnings”, says its CEO.
ELB Group’s agreement to be the South African distributor for the global Belaz range of heavy haulage trucks is expected to have a “substantial effect on our earnings”, CEO Stephen Meijers said on Tuesday.
ELB has entered into a heads of agreement to form a 50:50 joint venture company for ELB to distribute Belaz vehicles mainly to the local mining sector. Major competitors include Caterpillar, Komatsu, Hitachi and South African firm Bell Equipment.
Mr Meijers said Belarus-based Belaz had historically supplied the majority of Russia’s heavy haulage vehicles, but in the past 10 years had improved the quality of its products to be in line with major global competitors such as Caterpillar as it began a global expansion.
“Because of the size of the vehicles, what’s essential is the service centre — something that ELB has invested lots of money in over the past four or five years around SA.
“We will construct specific service centres to service the trucks at each mine site as and when required, so we will be able to service the vehicles wherever we sell them.”
Mr Meijers said the initial focus was on the South African market, though ELB would have the option to supply neighbouring countries in the future.
“It’s a very significant deal for us — we believe going forward it will definitely have some substantial effects on our earnings.”
There were only a few Belaz trucks in SA, mainly in the Northern Cape, and ELB would become an exclusive distributor.
“We believe the timing is perfect. We are in a depressed market. It’s going to take a bit of time to introduce the new technology and vehicles into the market, and by the time that introduction has taken place we believe the market will be taking off again.”
Meanwhile, Mr Meijers said ELB’s recently acquired B&W Instrumentation and Electrical business “made a positive contribution to the bottom line” in the last two months of ELB’s year ended June.
ELB last week reported that its sales for the full year were up 18% to R2.35bn, while headline earnings per share rose 2% to 382c.
“We have spent a lot of time and effort on converting the B&W debtors to cash, which has gone exceptionally well — so there are no risky debtors left on their balance sheet.
“We have introduced our business model into B&W… and we see some really good contribution coming in the next 12 months,” Mr Meijers said.
The formerly AltX-listed B&W had seen its market value gradually fall before being taken over by ELB. For its year ended August 2013, B&W reported a headline loss per share of 17.6c, from headline earnings per share a year earlier of 1.4c.