Bell shows profit against industry odds
South Africa's leading original capital equipment manufacturer and global Articulated Dump Truck specialist, Bell Equipment has weathered tough operating conditions in 2015 to record a profit after tax of R169 million for 2015, a 154% increase compared with 2014, and headline earnings per share of 167 cents (2014: 49 cents).
The challenging economic environment, however, saw group revenue decrease by 11% compared with 2014, as machinery sales continued to deteriorate worldwide spurred on by further declines in the commodity prices and subsequent low investment by the mining sector in projects requiring capital equipment.
According to Bell Group Finance Director, Karen van Haght, the improvement in profitability is mainly due to three factors: the group's right-sizing and cost reduction actions, higher production volumes in 2015 as well as exchange rate gains through the weakening Rand and the strengthening of the US Dollar against the Euro.
"Group overheads decreased by 18% in 2015 and the expense to sales ratio improved marginally to 21%. Going forward our focus will need to remain on disciplined cost management," she says.
Bell Equipment Chief Executive, Gary Bell, says sales volumes reduced in all markets other than North America, the world's largest ADT market. "Bell Equipment North America, together with parts supplied directly to this market from the parts warehouses in South Africa and Germany, more than doubled their contribution to the group's turnover in 2015. With nearly 12% of sales now delivered from the region, this is a significant gain on the 1,5% of just three years ago. We believe that with our new range of competitive E-series Articulated Dump Trucks (ADTs) we have good prospects for growth over the next two years.
"Although sales in Europe were depressed, the demand for machinery in the United Kingdom, largely driven by construction industry related demand, met expectations. The European region remains a key market for ADT sales and we are satisfied with the level of acceptance that our products have achieved in this highly competitive market."
In South Africa sales revenue decreased by 16% and contributed 41% of group sales in 2015, compared with 43% in 2014. Similarly sales from the rest of Africa contracted by 10% for the year under review although the contribution to external group sales remained unchanged at 15% for 2014 and 2015.
The global commodity slump and the affect of geo-political issues on general business sentiment, both locally and abroad, however, has not dampened Bell Equipment's drive for ongoing research and development. "The full new range of Bell E-series ADTs has now been completed and production will ramp up during the second half of 2016 in both the South African and German factories. The full range will be on exhibition at the Bauma show in Munich, Germany next month," says Bell.
Although the Bell Group's strategies have delivered an improved result over the period, Bell says that manufacturers in South Africa face ongoing challenges in terms of lack of meaningful support, poor response from government in dealing with some of the hurdles faced and of course issues such as power supply, labour, skills development and BBBEE difficulties. "Our positioning and location relative to the major markets is in itself challenging and few incentives are available to offset this fact," he adds.
Going forward, he says that short to medium term priorities are to grow the Bell ADT and associated parts and service volumes in the active global markets by increasing the group's dealer network coverage.
"Plans are also in place with regards to product range philosophies and the extent of manufacturing and the manufacturing locations in the medium to longer term. This has become particularly important as the bulk of our core products, the range of trucks, are now sold in the Northern hemisphere," concludes Bell.
Bell Equipment Chief Executive, Gary Bell, in front of a B50E, one of the group's new generation E-series large trucks.