Bell interim results June 2020
07 September 2020 15:45
Revenue for the interim period decreased to R3.1 billion (2019: R4 billion), gross profit declined to R526.5 million (2019: R799.9 million) and profit from operating activities contracted to R0.8 million (2019: R272 million). Loss for the period attributable to owners of Bell was recorded at R46 million (2019: profit of R157.3 million). Furthermore, headline loss per share came to 31 cents per share (2019: headline earnings of 164 cents per share).

In light of the current difficult economic circumstances and the global uncertainty caused by the COVID-19 pandemic, the board of directors has resolved not to declare an interim dividend.

Company outlook
We are seeing the green shoots of recovery in many of the markets and are excited by opportunities in the United Kingdom as it gears up for the major HS2 rail project. Many governments’ stimulus packages, including South Africa, are taking the form of infrastructure projects that should start in the near term. The much talked about infrastructure stimulus by our local and the US governments would ensure a much speedier recovery of these markets. Bell, as a provider of construction equipment, is eagerly preparing and waiting for these infrastructure projects to materialise.

After a stringent design and testing phase, we showcased a new machine, the Bell tracked carrier, at ConExpo in Las Vegas in March 2020, which was well received. The machine, geared for short hauls in extremely poor underfoot conditions, is designed to provide a niche solution to the USA pipelaying industry. Production has commenced and the first units will be delivered before the year end.

Despite these more positive developments, we anticipate difficult conditions for the remainder of 2020, characterised by ongoing uncertainty in the major markets and a continued low demand for commodities. However, our improved gearing and conservative approach will allow us to navigate these difficult times with confidence.

We will continue to concentrate our efforts on adjusting production volumes in response to weaker market conditions. At the same time, our key focus remains the restructure of operations in pursuit of improved operating margins, while meeting the challenges ahead of us. The continued easing of the lockdown by the South African government is seen as recognition that economic viability is critical at this time. In support of this, we are taking a long-term view with the objective of preserving as many jobs as possible during this period.

As the most significant local manufacturer of yellow goods in South Africa, and a significant employer, we have the potential to play a much larger role in employment creation, industrialisation and local economic growth. In this respect we continue to lobby government to level the playing field between ourselves and our major foreign competitors in South Africa, who enjoy minimal barriers to entry for their imported products, with some of them even providing vendor finance supported by their governments. Following the BBBEE transactions previously reported, our South African manufacturing subsidiary, BECSA, and our South African sales and distribution subsidiary, BESSA, are now 51% black owned, which improves the BEE scorecards of both entities and positions the group more competitively in the local market.

BECSA achieved a Level 2 BEE recognition in the period under review. The transformation is particularly advantageous to Bell customers as BESSA is now a 51% black owned and 30% black women owned entity, with a Level 1 BEE recognition, allowing customers to maximise the benefit of their procurement spend with BESSA. This improved BEE level, coupled with local manufacturing, is aligned with the goals of the 2018 Mining Charter and SANRAL’s transformation goals. This reflects the group’s commitment to South Africa and optimally positions the Bell entities to continue to deliver our premium product range and comprehensive support for the benefit of our local customers.

Bell currently distributes a number of Bell-branded, John Deere designed and manufactured products in certain markets in Southern Africa either through its own network or via sub dealers. The principal market is South Africa. Based on changes in the operating environment of both companies, Bell and Deere agreed on the future of these distribution arrangements. Bell will distribute Deere products until January 2023 and will continue to provide aftermarket, technical and product support to our customers for a further 10 years thereafter. Bell will transition from an exclusive to non-exclusive Deere dealer arrangement from March 2021.

Bell is currently in discussions with a number of international OEM’s with regard to providing well suited replacement products to its customers in Southern Africa. Details of such arrangements will be communicated when available. We are confident that Bell’s close relationships with, and local understanding of, its customers, will stand us in good stead with regards to reinvigorating certain lines of product through new product alliances.

Shareholders are also referred to the cautionary announcement released by Bell on SENS earlier on Monday, 7 September 2020 regarding the potential purchase by I A Bell & Company of the 31.4% shareholding of John Deere in Bell.

Going forward there continue to be many external factors that could impact both our global and local businesses. While our order book remains relatively strong, albeit at lower levels than experienced in the prior year, we are conscious of the potential secondround risks that COVID-19 may have on business globally. We are confident that our resilience and the speed with which we react to changing market conditions will continue to set us apart and further strengthen relationships with our stakeholders and the sustainability of our business.
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