Bell crippled by supply chain challenges as demand soars
Growing demand for raw materials, post-Covid-19 stimulus plans and increased infrastructure spending in a number of markets all drove demand for Bell Equipment’s products in the six months to the end of June. .
However, the bad news is that supply chain challenges have limited sales and prevented Bell from fully capitalizing on this strong demand, says CEO Leon Goosen.
These challenges included late and insufficient supply of components.
The continuing conflict between Russia and Ukraine has also exacerbated existing supply chain issues, with some suppliers affected by trade restrictions.
Bell released its results for the first half of fiscal 2022 on Friday.
Goosen says the group’s manufacturing operations have increased planned production in response to global market growth and a sizable backlog, but noted that ongoing supply chain challenges have delayed invoicing, resulting in a increase in inventories and borrowings during the period under review.
Inventories increased by more than R1 billion over the period, to R4.74 billion.
“Inventories are expected to decline as products are shipped from manufacturing plants and greater post-Covid normality returns to both supply and logistics chains,” Goosen says.
In the meantime, additional lines of financing are being put in place to finance the increase in working capital required to meet the increased production plan and sales outlook, as well as to absorb the effects of any further disruptions. of the supply chain.
Goosen also notes that the cost increases for raw materials, components and logistics are unprecedented — “double digits in many cases” — and the company has been forced to pass these additional costs on to customers. .
Locally, Bell is refocusing and expanding the traditional Bell/Matriarch ranges of forestry and agricultural products, as well as the JCB Agriculture range, by establishing a wider local dealer presence in South Africa.
Looking ahead, Goosen says that while there are signs of an economic slowdown in some markets, existing stimulus packages continue to drive demand for Bell products in most international regions.
He says the group has healthy order books in all regions for the remainder of fiscal 2022. He expects global demand for Bell Equipment’s products to continue to rise.
Mining activity in particular exceeded expectations, leading to higher demand and a better than expected result for this division.
However, prospects for the construction industry in South Africa remain subdued as the country grapples with low infrastructure spending in a weak economy.
Demand in the United States remains at levels well above what the group has seen for some time and additional products to meet this demand are planned.
Going forward, Bell plans to expand its manufacturing footprint in the northern hemisphere.
This will improve responsiveness and efficiency as more of the group’s articulated dump trucks will be produced closer to suppliers, as well as the markets in which they are widely sold.
The capacity created at the Richards Bay plant in South Africa will be used by additional products that will be introduced in the southern hemisphere over the next few years.
To this end, underground mining equipment and contract manufacturing have been identified as possible diversification opportunities for the Richards Bay manufacturing facility.
Goosen says Bell currently has two products in the underground mining sector, but the group wants to increase that offering.
“We are not strong in underground mining, but we want to be. We are developing new products. »
Contract manufacturing opportunities at the Richards Bay plant can include anything from trucks to heavy industrial products, such as railway bogies.
Bell said on Friday that revenue for the six months to the end of June 2022 was R4.2 billion, down from R3.84 billion in the same period last year.
Profit for the period was R210 million, down from R176 million.