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Supply chain hiccups prevent Bell from fully capitalising on post-Covid demand growth

30th September 2022

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The growing demand for commodities, post-Covid-19 stimulus packages and increased infrastructure spend in a number of markets all stimulated demand for Bell Equipment’s products in the six months to end-June.

However, the bad news is that supply chain challenges constrained sales and prevented Bell from fully capitalising on this strong demand, says CEO Leon Goosen.

These challenges related particularly to late and insufficient component supply.

The continued conflict between Russia and Ukraine also exacerbated existing supply chain issues, with certain suppliers affected by trade restrictions.

Bell released its results for the first half of the 2022 financial year earlier this month.

Goosen says the group’s manufacturing operations increased planned production in response to global market growth and a subsequent strong order book, but noted that continued supply chain challenges delayed invoicing, leading to an increase in inventory and borrowings in the period under review.

Inventory was up by more than R1-billion in the period, to R4.74-billion.

“It is anticipated that inventory will reduce as products are shipped from the manufacturing plants and as greater post-Covid normality returns to both the supply and logistics chains,” says Goosen.

In the meantime, additional funding lines are being put in place to fund the increase in working capital required to meet the higher production plan and sales outlook, as well as to absorb the effects of any further supply chain disruptions.

Goosen also notes that raw material, component and logistics cost increases are unprecedented –“double-digit in many cases” – and that the company has been forced to pass these extra costs on to customers.

Locally, Bell is refocusing and growing the traditional Bell/Matriarch forestry and agriculture product lines, along with the JCB Agriculture range, by establishing a wider local dealer footprint in South Africa.

Looking ahead, Goosen says that, while there are signs of economic slowdown in some markets, existing stimulus packages continue to drive demand for Bell products in most international regions.

He says the group has healthy order books in all regions for the remainder of the 2022 financial year. He expects global demand for Bell Equipment’s products to continue to increase.

Mining activity in particular has exceeded expectations, leading to higher demand and a better-than-anticipated result for this division.

However, the construction industry outlook for South Africa remains tepid as the country grapples with low infrastructure spending in a weak economy.

Demand in the US remains at much higher levels than the group has seen for some time and additional product to meet this demand is planned.

Going forward, Bell plans to expand its manufacturing footprint in the northern hemisphere.

This will improve responsiveness and efficiencies as more of the group’s articulated dump trucks will be produced closer to suppliers, as well as the markets in which they are largely sold.

Capacity created at the Richards Bay factory in South Africa will be used for additional product that will be introduced in the southern hemisphere over the next few years.

To this end, underground mining equipment and contract manufacturing have been identified as possible diversification opportunities for the Richards Bay manufacturing facility.

Goosen says Bell currently has two products in the underground mining sector, but that the group wants to increase this offering.

“We are not strong in underground mining, but we want to be. We are in the process of developing new products.”

Contract manufacturing opportunities at the Richards Bay plant can include anything from trucks to heavy industrial products, such as railway bogies.

Bell reported that revenue for the six months to end-June 2022 was R4.2-billion, up from R3.84-billion in the same period last year.

Profit for the period was R210-million, up from R176-million.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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