Bell Equipment taps into graders
Industrial machinery company Bell Equipment is expanding its product offering to include motor graders as it expects some improvement in the moribund local construction industry.
In a statement late on Friday, Bell announced a 63% rise in after-tax profit to R639m in the year to end-December adding that its order book was being maintained at record levels while “the group is taking orders for 2024”.
Improvement in its financial results, which were bolstered by a demand for their articulated dump trucks (ADTs) amid demand for commodities, country-specific post-Covid-19 stimulus packages, and increased infrastructure spending in several markets, caused the board to declare a final dividend of 90c per share from 50c previously.
Richards Bay-based, JSElisted Bell offers ADTs, haulage tractors, tractor loader backhoes, front-end loaders, sugar cane and timber-loading equipment through its nine marketing and support operations based outside SA, with more than 150 offshore distribution outlets and dealerships.
It said the addition of motor graders, multipurpose construction machines used to flatten surfaces during grading projects, is in anticipation of “some improvement” in the construction industry as the recent [SA National Roads Agency] awards have “created optimism and are positive for the country”.
Sanral in February awarded four major construction tenders in KwaZulu-Natal and the Eastern Cape, with a total value of R7bn, which is expected to boost construction activity.
FINAL TESTING
The group said motor graders also share several markets and dealer distribution channels with its traditional heavy equipment offerings used in the construction, mining, quarrying, sugar, forestry and waste-handling industries worldwide.
“Motor graders are complementary to the group’s flagship ADT product as a core earthmoving product,” Bell said. “The first generation of this product range is undergoing final testing and refinement with production set to begin as early as the fourth quarter of 2024.”
Bell said its agreement to distribute and support the JCB Agriculture product range in SA has boosted market share gains. JCB’s range includes backhoe loaders, wheeled loaders, excavators and telehandlers.
Despite the results, Bell chair Gary Bell and CEO Leon Goosen did not mince their words regarding how tough the SA operating environment has become.
They outlined that a cocktail of a severely encumbered national electricity provider, growing structural challenges regarding water and sanitation, as well as road infrastructure and port inefficiencies are hampering business.
This is against a backdrop of exchange rate volatility, high fuel prices, rising inflation and interest rates, as well as escalating electricity tariffs.
POWER INTERRUPTIONS
The executives said besides the disruptive effect on business, the mitigating action of running generators significantly increases the cost of doing business in SA, with far-reaching effects on the group, local suppliers, and customers.
“Power interruptions and changeovers also increase the risk of equipment being damaged, especially electrical switching and electronic equipment,” Bell said.
With expectations that SA will experience 200-250 days of load-shedding in 2023, predominantly at stage 4, Bell said it is investigating increasing manufacturing in its German factory and sourcing fabrications from outside SA. It is also probing a grid-tied solar system for its Richards Bay factory — the group’s main original equipment manufacturing operations.
Bell said it has already entered a 10-year lease for a property adjoining its Richards Bay factory, which houses a new warehouse. A seven-year lease agreement was also concluded for a portion of the neighbouring property in Kindel, Germany.
“We will continue to engage and work with the government. However, the cost and ability to do business in SA is a serious concern,” Bell said in a joint overview statement, adding it will weigh up the accumulative effect of the challenges when considering strategies for longterm sustainability.
“At the same time, Europe and the US have started 2023 strong,” Bell said, noting the group will remain cautious amid the banking crisis in the US, subdued economic activity and the possibility of recession.
Due to the Russia-Ukraine conflict and related sanctions, Bell said it has tested the group’s assets in Russia for impairment and found no losses.
The 69-year-old company, which began as a small engineering and agricultural equipment repair service, is valued at about R1.65bn on the JSE and counts Ninety-One and Allan Gray among its major investors.
While Bell’s share price was little moved at R17.25 on Friday, it has climbed more than 160% over the past three years.