For Bell Equipment, the cooling off from record highs after the epidemic of markets for heavy equipment and articulated dump trucks is an opportunity for the Richards Bay-based group to vigorously pursue opportunities in new and existing markets.
Chairman Gary Bell and CEO from January 1 this year Ashley Bell said in the groups integrated report, released on Friday, that with supply chain constraints of the past two years also easing the group sells machines in over 80 countries they anticipate a smoother year for production during 2024.
The order book for 2024 was at a reasonable level and total market demand volumes were expected to normalise, following the unprecedented record high experienced through 2023. Over 60 countries in the world were holding elections this year including South Africa, on May 29 which the group anticipated might have significant macroeconomic impacts.
Energy problems, port delays, the poor performance of state-owned enterprises and the risk of disruptions from social unrest, such as in 2021, were expected to continue to challenge doing business in South Africa. They said also that the construction sector in South Africa remained volatile, with the promised large infrastructure spend not materialising as quickly as hoped.
Although coal exports were a concern, Eskoms demand for coal was high, and at this stage demand from other mining sectors was expected to be in line with 2023.
New product and technology would be advanced in 2024. On dividends, the executives said they would be reserving cash at this time rather than pay a dividend, but this would be reviewed at the half-year stage.
In 2023, progress was made on a number of initiatives, including new product developments, the launch of the contract manufacturing division in Richards Bay and the growth of the independent forestry and agriculture product dealer network in South Africa.
Considerable obstacles were overcome, such as supply chain challenges, port congestion in South Africa and labour shortages in Europe, coupled with higher logistics costs and inventory buffers, which had impacted margins, inventory, debt levels and return on invested capital (ROIC).
The directors said inventory levels remained high, due in part to the remote location of the Richards Bay factory in relation to component suppliers and customer base for the articulated dump truck (ADT) product line.
In addition, certain owned sales and distribution operations resulted in a longer working capital cycle and greater investment in inventory.
We are implementing strategies that will, over several years, reduce our investment in inventory and increase the flexibility and resilience of the business, they said.
During 2023 a big investment was made in setting up the American Logistics Centre, in Charleston, South Carolina. This facility would back up their North American growth ambitions.
In that year, group revenue and profitability increased by 32% and 66% respectively, compared with the 2022 year. Inventory and receivables were higher than planned at year end and this impacted on debt levels.
During 2023, some 48% of revenue from all products sold was from Africa (including South Africa), 28% North America, 16% Europe and the UK, and 8% Australasia. Global demand for commodities translated into good ADT demand from Africa, South East Asia and Australia in mining. Further growth came from the US and parts of Europe, driven largely by the construction sector.
The US is the worlds largest ADT market and remains the greatest market opportunity for growth for our ADT business. Demand for machines exceeded our ability to supply due to constraints and logistical challenges in our supply chain. With market demand and supply chain pressure normalising, we expect to recover some of our 2023 market share losses, the executives said.
The Bell motor grader, which had been in development for several years, would be manufactured in Richards Bay from early 2025. Initial demand was expected in the Southern Hemisphere, but there was Northern Hemisphere market opportunity as well.
The ADTs continued to perform well across all markets, supported by ongoing technology innovations. Autonomous controlled ADTs remained a focal point, particularly in the Northern Hemisphere.
New mining safety regulations in South Africa had driven demand for pedestrian detection system (PDS) solutions.
This validates the forward thinking design of our PDS ready ADTs... , the group said.
