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CONSTRUCTION EQUIPMENT
 
Bell sees drop in profit, production in 2012, but believes 2013 will be better
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19th March 2013
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Construction and mining equipment group Bell on Tuesday reported a 12% increase in revenue to R5.67-billion, up from the previous year’s R5-billion. Profit for the year, at R242.9-million, was, however, down from 2011’s R296.8-million.

Bell said in a statement that 2012 had proved to be a mixed year for the company. It said the drop in profitability could be attributed to a number of factors.

While sales increased by almost 12%, the overall gross profit margin fell by around 6.1% in comparison with the previous year. Bell attributed this deterioration to greater competition in a declining market, following economic turmoil locally and abroad, particularly in the second half of the year.

There was also an increase in overheads of 11.1%.

The third contributor to lower profits was a reduction in other operating income of R31-million. This stemmed largely from a reduction in import duty rebates relating to government’s Motor Industry Development Programme, which came to an end in 2012, as well as a reduction in extended warranty income recognised.

On a more positive note, however, there was a “significant improvement in working capital management” in the 2012 financial year, reported the company.

“Both inventories and trade receivables are well down on the previous year and this has contributed to a positive cash flow for the year under review of R215-million. In the light of the group’s stronger statement of financial position, it has been proposed that a dividend of 40c per share be paid to shareholders.”

In a geographic context, the Africa region continued to contribute the lion’s share of Bell’s business and in 2012 sales on this continent constituted around 73% of group sales.

The general tailing off in demand for mining-related products in the latter half of the year had resulted in reduced throughput in the group’s production facilities, noted the company.

“Fortunately, improved forecasting and management of the group’s resources limited the potential impact of the slowdown.”

Bell said there existed further capacity at each of its plants and it was hoped that production would increase during the course of the year ahead.

“Management has been active in securing new markets for the group’s products and this is starting to show in the order book, which is currently in a healthy position. Management has also been seeking out new sources of supply for the products required in our production processes, with a view to achieving cost savings and reducing supply lead times.”

Bell was also unhappy with the increasing cost of doing business in South Africa.

“The rising costs of labour, electricity and fuel impact heavily on Bell’s competitiveness. Fortunately, however, this was mitigated to some extent by the recent depreciation of our currency.”

Relationship With John Deere
Bell this year faced a change in its commercial relationship with John Deere, following the planned launch by Deere of its own range of articulated dump trucks (ADTs).

Bell said on Tuesday that the Deere representative directors had already resigned from its board in order to avoid any conflict of interests. The ADT agreement between the two companies had also been terminated.

This had facilitated Bell's entry into certain strategic markets such as Canada, the US and South America, but also meant that John Deere would be free to sell its new ADTs and other products worldwide.

However, despite this move, it was anticipated that Bell’s role as John Deere’s dealer of construction and forestry equipment in South Africa, as well as in a number of other countries in sub-Saharan Africa, would continue.

Looking ahead to 2013, Bell said there were obstacles in the face of the eurozone turnaround, but believed that many economies were showing signs of growth.

“Certainly, within South Africa, the projected increase in infrastructure spend should have a positive impact upon Bell, particularly as its range of quality products fits well into the needs of [government’s] National Development Plan.”

Edited by: Creamer Media Reporter

 

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