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Bell Equipment. Picture: SUPPLIED
Bell Equipment. Picture: SUPPLIED

Bell Equipment reported a two-thirds jump in annual profit for 2023 boosted by unprecedented global demand for equipment in most markets, a positive commodity cycle and infrastructure spending abroad.

The JSE-listed heavy-equipment designer, manufacturer and distributor said that though it had gained “pleasing traction” in growth over the past two years, a cooling in the market was looming, and the board resolved not to pay a dividend for the first time in three years.

Revenue for the year ending in December increased 32% to R13.5bn and profit 66% to R793.6m as global commodity demand translated into good Articulated Dump Truck (ADT) demand from the mining sector in Africa, Southeast Asia and Australia.

CEO Ashley Bell, who took the helm in January after the resignation of Leon Goosen at the end of 2023, said further growth came from the US and parts of Europe, driven largely by the construction sector as infrastructure projects continued.

“The US is the world’s largest ADT market and remains the greatest market opportunity for growth for our ADT business,” said Bell.

The group said autonomous-controlled ADTs remained a focal point, particularly in the northern hemisphere, with fully autonomous driverless Bell ADTs operating on customer sites in Europe and North America.

The industrial company said it was powering ahead in pursuit of a greater level of manufacturing of its ADTs at its German factory, closer to both suppliers and the expanding markets in the northern hemisphere.   

“Our engineering team also continues to explore different technologies and avenues to find suitable alternative fuel and propulsion solutions for a zero-carbon future,” said Bell.

The R2.3bn market cap JSE-listed industrial transportation group supplies equipment to the construction, mining, quarrying, agriculture, forestry and waste-handling industries.

However, higher logistics costs and inventory buffers affected margins, inventory, debt levels, and return on invested capital in the year.

Moreover, supply chain challenges, port congestion in SA and labour shortages in Europe increased pressure on the Richards Bay-based group.

Though the company and its locally based suppliers have put mitigation measures in place to ease the damaging effects of load-shedding, Bell warned that these measures had driven up costs and the overall effect on the local economy was “a huge concern”. While coal exports were a concern, Eskom demand for coal was still high it said. 

“At this stage we expect demand from other mining sectors to remain fairly consistent with the levels seen during 2023,” said the CEO.

The construction sector in SA remained volatile according to the group, while the promised large infrastructure spending did not materialise as quickly as hoped.

In the UK, infrastructure projects were either scaled back or put on hold during 2023, which resulted in the underutilisation of large fleets of equipment and unforeseen pressure in this market, it said.

Bell operates in a cyclical business environment, which has benefited the group over the past few years. However, it warned there are “signs of global markets cooling off from record highs” with demand easing expected.

While the order book for 2024 remained at a reasonable level, it said total market demand volumes were expected to normalise after the unprecedented record high experienced through 2023.

Locally, the ongoing energy problems, port delays, the generally poor performance of state-owned enterprises, and the risk of potential disruptions from social unrest such as those experienced in 2021, were expected to continue challenging the ease of doing business in SA. 

Moreover, with more than 60 countries in the world holding elections in 2024, including SA in May, the group said it expected the general election could have “significant macroeconomic impacts”.

The board headed by nonexecutive chair Gary Bell erred on the side of caution, and said it would rather preserve cash resources than pay a dividend at this time citing volatile global political and economic uncertainties.

The last time the board chose not to declare a final dividend was for the year ended December 31 2020.

“This will be reviewed at the interim results stage,” it said.

On the upside, Bell said the expected easing of demand in major markets would give the group scope to vigorously pursue growth opportunities in new and existing markets for current products and the innovations the group is pioneering in the mining, construction, forestry and agriculture sectors.

To complement its forestry and agriculture product range, the group has developed a Bell timber processing head for timber harvesting operations, which is expected to go into production in early 2025.

Several new products including the Bell motor grader, which will be manufactured in Richards Bay will also kick off from early 2025.

Bell emphasised that the aftermarket segment would remain a critical aspect of the business. The group’s ability to provide parts and service support throughout the life of a Bell machine largely determines repeat purchases by customers and provides the group with a revenue stream throughout the life of the machine.

Bell Equipment share price was 9.82% lower at R24.80 at close of trade on Thursday.

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