Bell Equipment reports profit pressure

Bell Equipment, the manufacturer and distributor of heavy industrial equipment, has reported a decline in its half-year profit, citing a substantial softening of the construction sector in main regions as well as in the commodity cycle.

Though group revenue for the period rose 6% to R6.3bn, profit from operating activities slipped 2% to R526m. Headline earnings per share, a measure of profitability that excludes certain items, were down 6% to 321c.

The Richards Bay-based company, which is on the verge of being the latest company to ditch the JSE, said its performance in Europe and the UK during the six months to June came under pressure owing to a significant slowdown.

While it was upbeat that certain southern hemisphere markets for its ADT product- including SA and Zambia, where demand is traditionally driven by mining — proved more resilient than the northern hemisphere market, unfortunately port bottlenecks and delays in SA were ongoing and investment in inventory buffers remained necessary to counter this.

Bell on Monday said demand for ADTs in the US had remained “surprisingly strong” despite high inventory levels across the entire industry, which made for a significantly more competitive environment.

“Caution was the central theme throughout the first half of 2024, as signs of normalising from unprecedented high levels of demand across global markets became increasingly evident. Considering the cyclicality of our business and the tougher market conditions experienced, we are satisfied with our overall result and steady earnings for this interim period, and we remain optimistic about the future.”

The group said though the strategic initiative to increase its ADT manufacturing capabilities at the German factory and decrease working capital investment was progressing steadily, it flagged that it would still take three to four years to complete. The goal there is to increase flexibility and response time to market changes.

Highlighting that it expects the second half of the year to be more challenging in most of its markets, Bell said it would be “vigorously pursuing new markets and those markets where we currently have a low market share”.

Simultaneously, it is gearing up to launch its new Motor Grader product which will bolster its reach in existing and new markets.

Having kicked off with producing a fleet of pre-production units in the first half of 2024, Bell cautioned the first units would likely be delivered to customer sites in Southern Africa only by mid-2025, due to specific lead times from component suppliers.

“We are excited to launch our new Motor Grader to market, starting with Southern Africa initially and then followed by other southern hemisphere markets,” the CEO Ashley Bell and chair Gary Bell said in a note, “and look forward to growing our volumes over the coming years.”

In mid-July, Business Day reported on IAB’s intention to acquire certain issued ordinary shares in the company by way of a scheme of arrangement and to subsequently delist the company from the JSE after 30 years on the bourse.

The Bell family, which holds about 70% of the company via an investment outfit called IA Bell, offered minorities R53 cash per share, a 56% premium to the closing price on a specific date.

On Monday, it said the share price had since continued to climb. Therefore, the estimated fair value of the liability for cash-settled share-based payment arrangements with employees had grown to R123,6m from the expected fair value of R54m on June 30, due to the increase in share price after the half-year end.

Additionally, as per the implementation agreement regulating the proposed scheme of arrangement, no dividends would be declared, paid or made by the company.

gumedemi@businesslive.co.za