Struggle to gain traction with new Zim currency
BELL EQUIPMENT scraped through a 2 percent increase in taxed profit to R276.4 million in the year to end-December 2018 after a currency devaluation in Zimbabwe cut into a good operational performance throughout the group.
Revenue increased by 10 percent to R7.5 billion, while operating profit was up by the same percentage to R1.5bn. The share price reacted positively to the results yesterday morning, rising 2.85 percent to R11.20 a share by 11.40am. By the close the share price was at R11.00.
“It would have been a record year were it not for the devaluation of monetary assets and liabilities in Zimbabwe after they announced a new local currency, right at the end of the year… It was a once-off and we did all we could to reduce the impact 18 months ahead,” chief executive Leon Goosen said in a telephonic interview yesterday.
The Zimbabwe devaluation of R87.4m is included in foreign currency exchange losses in the profit and loss statement.
Headline earnings per share increased to 278 cents from 270c.
Goosen said they were “bullish” for a good 2019. And the Zimbabwe operations remained profitable.
“Most offshore target markets for our articulated dump trucks (ADTs) – Europe, US and South-East Asia – enjoyed good economic performance and we are encouraged by the outlook,” he said in a statement.
The uptake of Bell products in South-East Asia was positive. Residential development was driving demand in the US. Demand improved in Canada due to more stable commodity prices. Big infrastructure projects in Europe, including the Hinkley Point nuclear power station in the UK and the high-speed railway project HS2, were stoking demand for ADTs. Goosen said he was concerned about the potential impact of Brexit on future infrastructure spending in the UK.
In South Africa and the rest Africa, sales were low.
He said fourth quarter gross domestic product figures in South Africa showed declines in all four sectors that the group operated in – agriculture, mining, construction and forestry.
“Capital projects are few and far between, construction is taking a proper hammering. Hopefully this will improve after the May election,” he said. Management interventions in the Democratic Republic of Congo (DRC) and Mozambique operations were mitigating previous challenges in those countries.
A final dividend of 25c a share was declared, which when added to the interim dividend brought the total for the year to 45c a share, the same as in
of 2017. In October 2018 Kanu Equipment was appointed as a distributor in the DRC following the decision to sell assets in that country and migrate to a dealer model.
The Kobelco excavator range introduced in the second half of 2017 was enjoying acceptance in southern Africa.
The group order book remained strong, although the impact on US economic growth of the trade war between that country and China remained to be seen, he said.