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Bell looks to diversify production at Richard Bay plant through BHI launch

Image of outgoing Bell CEO Leon Goosen

Bell CEO Leon Goosen

12th September 2023

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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Bell Equipment is set to launch a new business, called Bell Heavy Industries (BHI), at the Mining Indaba in February next year.

BHI will be an arm of Bell Equipment Company South Africa, which is 51% black-owned, says Bell Equipment CEO Leon Goosen.

Bell is a global manufacturer, distributor and exporter of a range of heavy equipment for the construction, mining, quarrying, sugar and forestry industries.

BHI will operate from Bell’s plant in Richards Bay, KwaZulu-Natal, which is currently seeing a shift in articulated dump truck (ADT) production to Germany, in an effort to shorten the logistics chain to the group’s main suppliers, as well as its main markets, such as North America.

“The critical need for simple logistics routes has been clearly demonstrated over the last few years,” says Goosen.

He adds that new and existing products less affected by supply-chain challenges will continue to be manufactured in the South African plant. These include products such as those envisioned by BHI.

“We want to leverage what we have, and the plant in Richards Bay is a great asset. We see the formation of BHI as an enormous opportunity to grow.”

Goosen believes that Bell Equipment’s normal work could utilise the plant for one or two shifts, while a third shift could use the same equipment (such as plasma cutters) to make products such as railway bogies or excavator buckets.

Many excavators typically arrive in South Africa without buckets, while there is also a “huge replacement cycle”, says Goosen.

“As a country we desperately need industrialisation and this is one opportunity to work towards this goal.”

Bell on Tuesday recorded a 42% increase in revenue for the six months ended June 30, to R6-billion, compared with the same period last year. 

Operating profit was up 74%, at R536-million.

Goosen says strong demand in most markets resulted in the group “performing well”. 

“We are particularly pleased about the sales growth during the period in the North American market.”

Goosen notes, however, that the high global inflation and input cost increases witnessed last year continued to impact the group’s margins.

“In addition, the rand weakened sharply against major currencies between December, 2022 year-end, and the end of June, 2023. 

“Although a weaker rand is generally favourable for the group over the long term, it is challenging to respond to significant, sudden rand depreciation over a short period.”

Goosen adds that operating conditions have also been challenging, with ongoing supply chain issues and staff shortages at the Bell plant in Germany. This constrained growth, as well as Bell’s ability to fully capitalise on market demand. 

While direct sales from South Africa benefitted from strong commodity demand in the six months under review, the construction and road-building sectors remained weak.

Goosen says Bell’s new motor grader will be launched in late 2024. 

Outlook
Although global markets and the group’s order book are currently strong, the group says it is sensitive to the increasing possibility of markets softening. 

Europe could see some reduction in demand for ADTs with the Russia–Ukraine conflict potentially moving country-specific post-Covid-19 stimulus packages from infrastructure spending to building military assets.

Bell has mothballed its operations in Russia, and is unable to repatriate R72-million in cash stuck in the country.

Goosen also notes that the completion dates for some larger infrastructure projects in Europe have been moved out, resulting in a reduced demand for earthmoving equipment.

He says loadshedding, limited availability of vessel space for finished ADT products, partially owing to a rapid increase in vehicle exports from China, and the funding required for the long working capital cycle to import components and material from the northern hemisphere, continue to challenge the South African manufacturing operation.

Goosen is set to depart Bell at the end of the year. The search for his successor is under way.

 

Edited by Creamer Media Reporter

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