A 14% year-on-year decrease in sales for the financial year ended December 31, 2020, has led to JSE-listed materials handing equipment company Bell Equipment reporting a loss after tax of R57.2-million.
Additionally, following several years of large expansions in Europe and the US, Bell finds itself in a consolidation phase where no major expansionary capital expenditure (capex) spend has been budgeted for the foreseeable future, the company says in its provisional reviewed results.
"The sentiment going into 2021 has been cautiously optimistic from most regions, with a healthy order book in place for the first half of the year. An easing of restrictions for business is evident, with several mining and infrastructure projects coming on line or being unlocked in the short term."
"Although the group anticipates another tough year on the road to recovery, we believe that with an ongoing focus on cash preservation and expenses management, we have the capacity, the people and leading products to recover from the devastation caused by the virus," the company says.
Further, restructuring is being investigated in terms of location rationalisation and efficiency improvements.
"However, no retrenchments are planned at this stage, as people are critical to our operational objective of selling to and supporting customers and their Bell machines."
In the current difficult economic circumstances, the board has resolved not to declare a final dividend for the 2020 financial year.
"Covid-19 and subsequent lockdown restrictions had a devastating impact on the supply chain, customer operations and purchases.
"Furthermore, overall global markets have shrunk and competition has increased putting margins under immense pressure."
Bell implemented 20% short-time across all operations from May to July 2020. Group executive committee members took a 25% salary reduction during the same period and the board of directors were paid 30% less of their director’s meeting fees for six months.
"The protection of jobs remains a top priority, with all capex delayed and discretionary expenses halted to manage cashflow and trim expenses to match the reduced income levels," the company says.
Meanwhile, the industry outlook for South Africa remains depressed, as the country grapples with low infrastructure spending in a weakened economy with spiralling national debt, Bell states.
Post the financial year end, Bell has been appointed as the distributor for the full range of construction equipment multinational JCB construction products in South Africa, effective May 1, 2021. The partnership with JCB should lead to some gains within the markets and growth for the company. JCB has significant market share in the sectors in which it is active, and Bell has increased its resources to ensure its support is able to match the machine population, Bell says.
"This change presents an exciting and important opportunity to reinvigorate the product lines affected by the changes in relationship with John Deere, as well as additional products, and will enable Bell to be better positioned as a full line distributor in this important market."
From March, Bell transitioned to a non-exclusive construction and forestry equipment multinational John Deere dealer arrangement to allow John Deere to engage with and start appointing additional dealers. Bell will continue to distribute John Deere products until January 2023 and will provide aftermarket, technical and product support to customers for a further ten years thereafter.
"In addition to changes to our strategic partnership with John Deere, in early November 2020, the company was notified by IA Bell & Company, a 38.7% shareholder in the company, that it had entered into a formal binding agreement to acquire John Deere’s 31.37% shareholding in the company, subject to certain conditions precedent.
On March 9, 2021, the company received notification of a nonbinding expression of interest from IA Bell & Company in respect of a possible transaction to acquire the entire issued ordinary share capital of the company not already held by or to be acquired by IA Bell & Company if the John Deere transaction outlined above is implemented, by way of a scheme of arrangement in terms of Section 114 of the Companies Act, subject to the fulfilment of certain conditions precedent, and further subject to the John Deere transaction becoming unconditional and being implemented.
Shareholders will be informed if, and when, the company is advised that a binding offer is being made and the company will continue to comply with the JSE listings requirements and will comply with the Takeover Regulation Panel requirements, to the extent applicable, in this regard.
Throughout this process the board is focused on sound governance, looking after shareholders, employees and customers as a priority, Bell states.