Machinery and engineering company Bell Equipment has decided against declaring an interim dividend amid global uncertainty and to boost investment in its own operations to help it benefit from greater market demand, it said in its interim results on Friday.
The company is ready to cash in as it upped its manufacturing operations, supported by a stronger order book. The higher market demand comes as some of Bell’s key international markets increased infrastructure spending in the first six months of the year, demand for commodities rose and as post-Covid-19 stimulus packages were rolled out.
Bell Equipment — valued at R1.36bn on the JSE — manufactures, distributes and exports a wide range of heavy equipment for the construction, mining, quarrying, sugar, forestry and waste-handling industries worldwide. The group boosts its offering with aftermarket products, including the sale of parts, service contracts and transport, and extended warranties and rentals.
The company has bounced back from the Covid-19 pandemic, which hit it and its competitors, while internal efficiency improvements, working capital management and cost-containment initiatives bolstered its bottom line. Demand for its products increased as construction picked up after lockdowns cut production and sales volumes in 2020.
The good news has not been without its setbacks, however, as the outlook for the construction industry in SA remains bleak with low infrastructure spending in a weakened domestic economy despite the Treasury increasing the allocation for public sector infrastructure spending by close to R200bn. This aims to lend a hand to the expenditure side of the battered economy as corporations remain reluctant to invest amid energy supply and logistics problems.
Meanwhile, Russia’s invasion of Ukraine in part continues to worsen supply-chain issues worldwide, delaying invoicing and leading to an increase in inventory and borrowings for Bell, preventing it from fully capitalising on higher demand.
High inflation is also squeezing the company across the board as increases in raw material, component and logistics costs are “unprecedented” and have had to be passed on to customers.
Its revenue is up one-tenth year on year to R4.23bn for the period to end-June. More than 70% of its revenue comes from equipment sales, followed by part sales, which make up close to a quarter.
Headline earnings per share, a widely used measure of profit that strips out impairments and one-off items, jumped 19% to 210c. Profit for the period rose by 19.7% to R210.3m.
After gaining as much as 5.7% in intraday trade Bell’s share price ended the day up 2.3% to R13.80.
Note: September 10 2022
This story has been updated with Bell Equipment’s closing share price on Friday.
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