The extent of the decline in the global economy was clearly felt by Bell Equipment. They announced their results for 2009 on 11 March. JSE listed Bell is the designer and manufacturer of South Africa’s only locally designed and developed, production line vehicle. Despite the financial loss there were some positive signs which bode well for the future.
The loss for the year was R272-million. This was less than the trading update issued in December 2009 of a loss of between R370-million and R410-million. The loss was despite management taking aggressive steps to curb the losses. “However the curbing was done on a basis which would minimise disruption to customer service and long term competitiveness. As a result there was no cut back on critical path research and development. Parts and Service turnover as a percentage of total turnover showed a pleasant increase but was also indicative of customers deferring replacement of equipment” said outgoing Chairman Howard Buttery.
A further positive was the inventory reduction of R928-million to adapt to the changed market conditions. The cash inflow for the year totaled R272-million. “A key limiting factor has been availability of finance for customers wanting to make high value purchases. We are now seeing some increasing appetite for deals from the finance houses,” said incoming Chairperson Mike Mun-Gavin.
The company was supported through the trough by additional funding being made available by major shareholders. The Bell family made loans of R300-million available and John Deere made additional trade credit available. In addition the Industrial Development Corporation made a loan available of R150-million under the government’s distressed sector programme. “There are discussions about further loans focused on supporting our Research and Development initiatives and capex requirements so that we can take immediate advantage of any upturn with new products and updated manufacturing equipment and facilities. The support from global players providing a wider range of products, such a John Deere as a shareholder and Hitachi and Liebherr as trade alliance partners, demonstrate confidence in the Bell Equipment brand” said Gary Bell, Group CEO.
“The level of sales over the last three months has improved and we are seeing increasing enquiries. However we are being cautious of the growing green shoots, led by the recovering commodity markets and ongoing road infrastructure spend, but still have contingency plans should the projected economic recovery not occur. It is good to be hiring people again, albeit in some cases cautiously on a contract basis until we can be certain of sustainable employment, rather than retrenching” said Gary Bell.
“While our European operations had been the hardest hit, our operations in the rest of Africa reflect the relatively higher economic growth in developing markets. We are also getting orders again from our alliance partner in Asia-Pacific. The investment made in distribution operations in the past are paying off and bode well for the future” said Gary Bell.
“Further indication of government support for the Capital Equipment and Yellow Metal sectors was the reinstatement of Bell on the vehicle incentive and the announcement last month by the Minister of Trade and Industries of the Industrial Policy Action Plan version 2. The latter has a major emphasis on Metals, Capital and Transport Equipment. These sectors, in which Bell is active, should be able to contribute to the aggressive job creation targets set by government. We are a lot more labour intensive, especially for entry level jobs, than fixed capital intensive manufacturing” said Guy Harris, Group Strategy and Public Affairs Director who added that “we and the relevant industry associations and other key stakeholders are in ongoing discussions with government on how we can be enabled to help government achieve its goals and address the key challenge of unemployment faced in our country”.
“The group is also contributing to the current evaluation being done by the Department of Trade and Industry and its consultants of the Medium and Heavy Commercial Vehicle industry which has been extended to cover yellow metal and tractors. We are proud of the value we add to South African materials using South African labour and South African ingenuity. We would also like to see government supporting an effective buy local campaign through their own purchases and projects they fund at national, provincial and local government as well as parastatal levels. They must ensure that the contractors and suppliers on those projects also source locally where possible. This will be key to achieving the IPAP2 objectives” added Guy Harris.
“Despite the retrenchments, deferred salary increases and salary cuts at higher levels the team morale is still good and there is strong loyalty amongst team members and suppliers. We are working with the unions on the buy local campaign and ensuring appropriate incentives for the industry” added Gary Bell.
