Bell Equipment sitting pretty on rand depreciation

Johannesburg – Bell Equipment, the listed manufacturer of heavy equipment for the construction and mining sectors, was given a competitive advantage on pricing by the depreciation in the value of the rand against major currencies last year.

But Gary Bell, the chief executive of Bell Equipment, said yesterday that the rand’s fall in the medium to long term was not good news for the local economy as a whole and would drive up costs in due course.

Read: Bell forecasts 160% rise in profit

The rand depreciated by 35 percent against the dollar and 21 percent against the euro last year.

Bell said the group was satisfied with the progress made in the North American market and was particularly optimistic about future opportunities to increase its market share in the largest capital equipment market in the world.

Rising costs

However, Bell said concerns remained about the increasing cost of doing business in South Africa, including the impact of price increases and the interruption of electricity supply.

Despite this, the group continued to engage with the government at various levels and would encourage and support greater dialogue between industry and the government, especially regarding the government’s plans to expand its support in the value-add and manufacturing sectors, he said.

“We remain supportive of all initiatives to improve our economy and to stimulate employment in our industry,” Bell said.

Bell said the group also remained committed to transformation and broad-based black economic empowerment (BBBEE) in the country and had developed strategies and action plans to achieve compliance under the revised codes of good practice.

“A key strategic element in achieving compliance will be the introduction of a BBBEE equity partner at Bell Equipment Sales South Africa and the process to achieve this has commenced,” he said.

Bell Equipment yesterday reported improved profitability in the year to December following rightsizing and cost reduction initiatives implemented during the year and foreign currency gains due to the depreciation of the rand.

Bell said higher production volumes at its Richards Bay and Kindel facilities also aided profitability during the year.

The group reported an almost 241 percent increase in headline earnings a share to 167c in the year to December from 49c in the previous year.

Revenue declined 10.7 percent to R5.9 billion, but expenses also dropped, falling by 17.6 percent to R1.24bn.

Operating profit improved by 57.6 percent to R291.76 million, while profit after tax had increased by 154 percent to R168.85m. Bell said the profit after tax was achieved despite machine sales volumes and sales in rand terms declining in all markets other than in North America.

“The impact of the weaker rand on translation of sales denominated in foreign currencies was not sufficient to offset the impact of the reduction in sales volumes,” he said.

Bell said the group expected markets to remain flat this year but would continue to deliver on their customer needs globally and count on their ongoing support to see the group through these difficult times.

While the prospects for this year were stagnant, the group’s long-term strategies were innovative and dynamic to position the company for growth and success once markets had regained some of their lustre, Bell said.

Shares in Bell Equipment were unchanged, closing at R12.50 on the JSE yesterday.