Positive momentum continues at Bell Equipment supported by global demand for earthmoving equipment

Published: 26 March 2019


• Revenue up 10% to R7,5 billion
• Profit from operating activities up 12% to R453,8 million
• Profit for the year up 1,6% to R276,4 million
• HEPS up 3,0% to 278 cents per share
• Net Asset Value up 12,4% to 3 526 cents
• Unchanged final dividend of 25 cents per share declared

Richards Bay, 18 March 2019 - JSE-listed Bell Equipment, a proudly South African company with over 60 years of experience in the manufacture, distribution and support of materials handling equipment, today released results for the year ended 31 December 2018, reporting a 10% increase in revenue to R7,5 billion.

The group is encouraged by achievements made in the strategic focus areas of growing the sales of its Articulated Dump Trucks (ADTs) and aftermarket business globally as well as increasing production rates, all aimed at creating long-term value and ensuring sustainable growth.

"Most offshore target markets for our ADTs - Europe, the US and Southeast Asia - enjoyed good economic performance in the past year and as such, we are encouraged by the outlook," said CEO, Leon Goosen, adding that the uptake of Bell Equipment's products in Southeast Asia was positive due in part to the fact that mining conditions and operations there are very similar to those in Africa.

"In the US, the world's largest ADT market, residential development is driving current demand, where our ADTs are used for the provision of bulk earthworks. Demand also improved in Canada thanks to more stable commodity prices."

Goosen said ongoing massive infrastructure projects in Europe, including the Hinkley Point nuclear power station in Somerset in the UK and the upcoming high-speed railway project, HS2, are also increasing demand for the group's ADTs. "However, we are mindful of the potential impact Brexit negotiations may have on this market."

He went on to say that in South Africa and on the rest of the continent sales are low and remain under pressure. "Positive management interventions in the Democratic Republic of Congo ("DRC") and Mozambique operations are mitigating against the challenges we've experienced in those countries in the past, however, the currency crisis in Zimbabwe has resulted in a significant loss for the group. "Although commodity prices have improved, investor appetite for the South African mining industry remained under pressure during 2018.”

Financial summary
Both revenue and gross profit for 2018 increased by 10% to R7,5 billion and R1,5 billion respectively.

Profit after tax of R276,4 million was 2% up on 2017, in what would have been a good result were it not for a substantial devaluation of RTGS dollar-denominated monetary assets and liabilities in Zimbabwe following the announcement of a new local currency in that country and higher interest charges on group borrowings. The Zimbabwe devaluation of R87,4 million is included in foreign currency exchange losses in the statement of profit or loss.

Headline earnings per share is up from 270 cents per share to 278 cents per share.

The Rand was very volatile but on average weaker in 2018 compared with the 2017 financial year, particularly in the second half of 2018, and this has had a positive impact on sales and margins. The weaker Rand also contributed to an increase in the reported Rand value of operating expenses that are denominated in foreign currencies. Expenses, excluding the foreign currency loss referred to above, were generally well contained, increasing by a modest 5%.

The board declared a final dividend of 25 cents per share, which when added to the interim dividend of 20 cents, amounts to a total dividend of 45 cents for the year, the same as for 2017.

In October 2018 Kanu Equipment was appointed as an authorised distributor in the DRC following the decision to sell assets in that country and migrate to a dealer model. "The Kanu Group distributes and supports our earthmoving equipment in a number of African countries and we're confident that their strong management team in the DRC will drive the business and provide customers with the level of service and support that they expect and deserve," Goosen explained.

The Kobelco range of excavators, introduced in the second half of 2017, continues to enjoy acceptance across all industries in Southern Africa, with Bell subsequently introducing three mini excavator models at the beginning of 2018 that are proving to be equally popular in the light construction and forestry sectors.

The uptake of the Kamaz range of heavy-duty trucks in the Southern African mining and construction industries was slightly slower than anticipated, with plans for the localisation and production of these trucks in Richards Bay having been delayed until market demand makes this investment more feasible. Bell is investigating other applications for the product to make faster headway in this highly competitive market.

During 2018 the group opened an American Logistics Centre ("ALC") in North Carolina to better serve its customers in the region and to support the aftermarket requirements necessitated by the increased uptake of its products in the US. Following the completion of the new European Logistics Centre ("ELC") in Alsfeld, Germany in 2017, the group commenced the second phase expansion of its factory in Eisenach-Kindel in mid-2018. The facility, scheduled for completion in the third quarter of 2019, will incorporate state-of-the-art manufacturing equipment geared towards reducing operational and product costs as well as improving flexibility and supporting growth in the Northern Hemisphere markets.

Goosen went on to explain that, given the more buoyant global conditions the board took a strategic decision to increase production and aftermarket working capital to respond more rapidly to higher demand across the spectrum of client industries.

A planned third B-BBEE transaction, will allow customers to maximise procurement spend when purchasing from Bell Equipment Sales South Africa ("BESSA") and will assist in meeting the procurement goals as set out in the 2018 Mining Charter.

"In order to accelerate transformation within the broader construction industry, and to open doors for black-owned and managed Construction Industry Development Board ("CIDB")-graded contractors, Bell was the first original equipment manufacturer ("OEM") to sign a Memorandum of Understanding with the South African National Roads Agency ("SANRAL"), explains Goosen.

Goosen said the group would continue its focus on research and development, with a new series prototype due in the second quarter of 2019. An extensive product upgrade for the small ADT truck range will also be launched at the end of the year.

"Our manufacturing plant expansion in Germany will be completed in the third quarter of 2019 with a testing phase preceding full production. Investment into the Northern Hemisphere will continue at our ALC where we will implement the SAP software system so that all three logistics centres are on a similar platform to enable us to provide parts online. The world is changing, and our customer base increasingly requires online solutions, and thus we are investing in these."

He concluded by saying that many external factors could continue to impact Bell Equipment's global and local businesses, and that while the group's order book remains strong and the business continues to grow in the US and the EU, it recognised the risks that Brexit and the possible trade war between the US and China may have on business globally and is monitoring the situation closely.