Bell plans to grow heavy industries contract manufacturing business

Bell Equipment, the listed designer, manufacturer and distributor of heavy industrial machinery, is pursuing insourcing heavy metal fabrication opportunities to grow the Bell Heavy Industries (BHI) contract manufacturing business in Richards Bay.

This comes as the group ramps up production of its flagship trucks away from SA towards manufacturing in its German factory, saying this would increase efficiencies as the product will be closer to its main market. It will also free up space in the SA factory for the manufacturing of new product ranges.

CEO Ashley Bell said the company’s growth strategy was to grow the business organically by investing in the ongoing development and enhancement of Bell OEM (original equipment manufacturer) products, increasing market share in key markets, and growing the BHI contract manufacturing business in Richards Bay.

In pursuing the heavy metal fabrication opportunities to diversify local operations, he said the group had initiated discussions with potential customers in the construction, energy, mining, and transport sectors to help stimulate the SA manufacturing sector via contract manufacturing to support local demand.

“This is a new concept for us,” Bell told Business Day. “We have a factory here in Richards Bay with significant capabilities. We have factory equipment. We have people with vast skills and experience in the manufacturing game and really we are looking to target opportunities where localisation of manufacturing is required. We are able to source materials from the local market as well. 

“For us, it’s relatively new territory in the sense that we are reaching out to third parties to manufacture products that may not necessarily be the big yellow machines which is what we’ve always manufactured.

“It is early days for us with this division, but we are certainly going to be giving it a lot of focus to see what can be done. It doesn’t require any additional investment from our side; we already have the assets in our factories,” said the CEO.

Richards Bay-based Bell traditionally offers Articulated Dump Trucks (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.

The group, which has a R2.3bn market capitalisation on the JSE is also gearing up to manufacture its motor grader at the coastal facility with production touted to start from the first quarter of 2025.

Manufacturing close to the supplier base and market has become a central note in the group’s growth strategy, hence the move to shift the ADT manufacturing base to Germany.

Last year, Bell Equipment outlined to shareholders that to become a global player and to succeed in the long run, it had to manage efficiencies and increase capacity in both SA and Germany.

In preparation, Bell entered a seven-year lease agreement for a portion of its neighbouring property in Kindel, Germany. A 10-year lease for a property adjoining its Richards Bay factory, which houses a new warehouse, was also concluded.

For the year to end-December, revenue increased 32% to R13.5bn and profit 66% to R793.6m as global commodity demand translated into good ADT demand from the mining sector in Africa, Southeast Asia and Australia with increased infrastructure spending in several markets. 

Cautiously optimistic that Bell’s overall growth momentum would be maintained, the CEO said the company would target market share growth in markets where Bell was coming off a fairly low base.

He said it would be looking to penetrate certain markets that it has not been able to service in the recent past on account of supply constraints.

“From a growth perspective the US is a very big one for us ... in terms of new markets that we are looking to break into we’re looking at the Middle East which is a market that we haven’t had product to supply in recent years,” said Bell.

“There are others such as Indonesia where we have been supplying machines but where like the US, there’s scope for us to grow our market share.”

The board withheld the latest annual dividend and Bell said this was on account of the strategic imperatives that the group has, coupled with uncertainty in the market.

Bell said with commodity prices coming off recently, certain infrastructure projects being put on hold or cancelled in some markets alongside the industry having caught up from a supply chain perspective after Covid-19, a slowdown was on the cards.

“We’ve got to tread cautiously... we will have a view in the next couple of months, as to the extent of the normalising that we are seeing in the market,” he said, emphasising that the slowdown was a normalisation and not a crash.

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. 

Bell’s share price was 0.17% higher at R24.05 at close of trade Friday, having risen more than 39% in the past six months.

Gumedemi@businesslive.co.za