Bell Equipment’s plants are currently operating at roughly 70% of pre-Covid-19 levels, says CEO Leon Goosen.
The South African operation at Richards Bay is running slightly below this average, however, as it had stocked up on inventory prior to the pandemic in anticipation of a yet-to-materialise domestic economic recovery.
Bell’s German plant faced a two-week shutdown owing to Covid-19, not as a result of government action, but rather component suppliers shutting down their operations, says Goosen.
The Richards Bay plant closed for a month during the lockdown under Alert Level 5.
“Supplying the coal industry meant we opened again in May,” says Goosen.
Despite not yet operating at 100%, Bell’s “absolute endeavour is to minimise job losses”, he adds, as the company hopes economic conditions will improve as the Covid-19 pandemic fades.
The company will, however, look to restructure, in pursuit of improved operating margins.
“We have to look at all of our locations,” says Goosen. “Are we in the right location? Can we potentially consolidate some of the sites we have around the world? Are there efficiency improvements we can gain? We are trying to see how we can better utilise what we have.
“For us, it is all about our people. The product doesn’t sell itself or look after itself. People do that.”
Goosen says there is no danger of Bell closing down manufacturing in South Africa.
He notes, however, that Bell is in discussion with the South African government around support for its local manufacturing efforts, especially in terms of government moving “a little bit quicker with import protection”.
“As the most significant local manufacturer of yellow goods in South Africa, and a significant employer, we have the potential to play a much larger role in employment creation, industrialisation and local economic growth.
“In this respect, we continue to lobby government to level the playing field between ourselves and our major foreign competitors in South Africa, who enjoy minimal barriers to entry for their imported products, with some of them even providing vendor finance supported by their governments.”
The Bell Equipment group posted a loss of R52-million for the six months ending June 30, compared with a profit of R152-million for the same period last year, owing mainly to weak economic conditions, the Covid-19 pandemic and the pressure on product margin in various territories as the market contracted.
Revenue for the period fell from R4-billion to R3-billion.
Looking ahead, Goosen says Bell is seeing some green shoots, with the company especially excited by opportunities in the UK as it gears up for the major HS2 rail project.
“This [project] has really helped our order book.”
Many governments’ stimulus packages, including South Africa’s, are taking the form of infrastructure projects that should start in the near term.
“The much-talked-about infrastructure stimulus by our [government] and the US government would ensure a much speedier recovery of these markets. Bell, as a provider of construction equipment, is eagerly preparing and waiting for these infrastructure projects to materialise.”
Goosen says Bell’s current global order book is about 10% lower than it was at the same time last year.
The order book showed a sharp decline during the initial phases of Covid-19, but “has really recovered well”.
Bell currently distributes a number of Bell-branded, John Deere-designed and manufactured products in Southern Africa, either through its own network or through subdealers.
Bell will now halt the distribution of these products in January 2023. It will, however, continue to provide aftermarket, technical and product support for customers for a further ten-year period.
Bell will also transition from an exclusive to nonexclusive Deere dealer arrangement from March next year.
Bell is currently in discussion with a number of international capital equipment manufacturers to provide replacement products for its customers in Southern Africa, says Goosen.
The shift in the relationship between John Deere and Bell has also seen the potential purchase by I A Bell & Company of John Deere’s 31.4% shareholding in Bell.
I A Bell & Company is currently a 38.7% shareholder in Bell.
“John Deere is not pulling out of South Africa,” says Goosen.
“They wish to distribute other products in South Africa that are currently competing with products that we own in this market. They will definitely stay here. This will allow us the opportunity to expand our product range and, potentially, develop some of the products that we currently distribute for them