Bell Equipment warns of profit drop and cuts capital expenditure
The group expects headline earnings per share for its six months to end-June to fall at least 80%
Bell Equipment, the listed manufacturer and distributor of heavy industrial equipment, says it has generated positive cash flow during the first half of 2020, but expects a sharp drop in profits as Covid-19 batters SA’s economy.
Headline earnings per share, a widely used profit measure that strips out exceptional items, is expected to fall at least 80% in the six months to end-June, from 164c previously, due to weak economic conditions, particularly in SA, the group said in a trading update.
Measures taken by various governments to curb the spread of the coronavirus has weighed on production and sales, the group said, with management focused on reducing costs.
“The company has generated positive cash flow during the six-month period, mainly due to a more conservative outlook on sales, lower production volumes and reducing inventory in line with market demand,” the update on Wednesday read.
Bell had said in May during the release of its results to end-December 2019 that the reduction in sales outlook which was identified in the last quarter of 2019 led to a cut in the production plan for 2020, and the company was selling from existing inventory levels.
“The group’s sales forecasts are based on expected weak global market conditions and modest sales volumes that are approximately 30% lower in 2020 than in 2019,” the group said at the time. It had also noted then that it had only seen delays in customer orders, but no significant cancellations as a result of Covid-19.
Regardless, Bell said its capital expenditure budget had been reduced and any non-essential expenditure had been halted.
The group's results to end-June are expected to be released on September 4.
In afternoon trade on Wednesday, Bell Equipment’s share was unchanged at R5.49, giving it a market capitalisation of R545m. The group’s share has fallen about 40% so far in 2020.
Update: July 15 2020
This article has been updated with additional information
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