Bell Equipment is investigating making more of its trucks at its German factory, sourcing fabrications from outside South Africa, and installing a grid-tied solar system for its Richards Bay factory to cope with load shedding, according to the company’s chairman, Gary Bell, and its CEO, Leon Goosen.
Writing in the 2022 annual report that was released on Friday, they said it was expected that South Africa would experience between 200 and 250 days of load shedding in 2023, predominantly at stage 4.
“Eskom’s long-term implementation of extended load shedding in 2022 had far-reaching effects on the group, our local suppliers, and customers. Besides the disruptive impact on business, the mitigation action of running generators significantly increased the cost of doing business. Power interruptions and changeovers also increase the risk of equipment being damaged, especially electrical switching and electronic equipment,” they said.
From a production perspective, the volume outlook for this year was currently strong and work in progress had been normalised, while supply chain issues were no longer expected to be a major constraint, especially in the second half of this year.
“The order book is being maintained at record levels, and the group is taking orders for 2024. Finished goods inventory levels are low for current demand, and are expected to remain low due to the strong order book.”
They said the cost and ability to do business in South Africa was a serious concern.
“The accumulative effect of the challenges that local businesses must grapple with needs to be weighed up when considering strategies for long-term sustainability,” they said.
These included exchange-rate volatility, fuel prices, rising inflation and interest rates, escalating electricity tariffs, a severely encumbered national electricity provider, growing structural challenges around water and sanitation, and road infrastructure and port inefficiencies that frustrate logistics.
Europe and the US had started this year strong, but the banking crisis in the US and macroeconomic indicators, most notably subdued economic activity and high inflation levels and interest rates, signalled possible recession.
The Richards Bay-based maker of heavy mining, construction, underground mining, forestry and agricultural equipment had a “pleasing year”, with taxed profit up 63% to R478.9 million last year after strong market conditions resulted in all regions outperforming sales volume budgets, except for Europe, which had an exceptionally high budget considering the actual volume sold into this market in the last five years. The group operates in over 80 countries.
Group sales were up by 28% on 2021, largely owing to an improvement in the supply chain in the last quarter that meant production could be caught up on and products invoiced and delivered to customers by year-end and in the face of multifarious challenges.
During the year, increased demand for commodities, country-specific post-Covid-19 stimulus packages, and increased infrastructure spending in several markets drove demand for the group’s vehicles.
To mitigate supply chain challenges in the past year, high-risk suppliers were closely managed and supply-continuity interventions were put in place.
These included, among other initiatives, the interplant movement of parts to minimise line stoppages, production sequence changes to meet shipping plans, and the implementation of alternate supply lines, where feasible.
Other challenges in the past year included soaring fuel prices, high inflation and interest rates, record load shedding, and floods in KwaZulu-Natal in April that caused logistics problems. A reduced frequency of vessels was also experienced, which increased the need to use much more expensive air freight.
Borrowings were stable and at acceptable levels. Favourable commodity prices fuelled demand in the mining industry. Construction was flat, but the building industry rallied and the demand for backhoe loaders and smaller equipment increased as a result.
Demand was strong in the major international markets of the US and the UK. Australia and New Zealand also maintained a high demand for the group’s articulated dump trucks (ADTs).
“In South Africa, we started distributing JCB Agriculture alongside the Bell Forestry and Agriculture range in May. Over a dozen independent dealers have been appointed as part of our strategy to grow our exposure in these industries through increased products and improved service.”
Underground mining has been identified as another opportunity for growth and the new OEM business division was focused on expanding the product range, providing specialised customer support, and establishing new global markets.
The two underground articulated dump truck models and a rock scaler had been well accepted in existing African markets. The range would be expanded to include a six-ton low-profile load haul dump (LHD) loader.
To facilitate growth, Bell entered a 10-year property lease for a property adjoining its Richards Bay factory, which houses a new warehouse. A seven-year lease agreement was also concluded for a portion of the neighbouring property in Kindel, Germany.
In South Africa, some improvement in the construction industry was anticipated as the recent Sanral awards had created optimism and were positive for the country, Bell and Goosen said.
BUSINESS REPORT