Bell pays R120m in BEE buy-backComment on this story
Johannesburg - Bell Equipment is in discussions with new potential black economic empowerment (BEE) partners after its previous strategic empowerment partners decided to exercise their right to put their 30 percent stakes back into the group towards the end of last year.
The listed manufacturer of heavy equipment for construction and mining was required to pay R120 million to buy back this shareholding in Bell Equipment Sales South Africa from Kagiso Strategic Investments III (22.5 percent) and Bell Equipment employees (7.5 percent).
This shareholding was acquired in 2007 in a transaction valued at R79.5m.
Gary Bell, the chief executive, said on Friday that the group was still operating on its old broad-based BEE certificate, which at level 4 meant 100 percent of its customers’ purchases qualified as BEE expenditure.
But Bell said the group had a great deal to consider in order to achieve the required points under the new broad-based BEE codes, particularly as ownership was not sufficient. Much work needed to be done in terms of structuring the business to meet the new requirements.
He confirmed the group was in discussions with potential empowerment partners and would see in the next six or seven months if it would be able to finalise a transaction.
The weakness and unpredictability of the resource-based economy, the weakening in the value of the rand and the protracted strikes and labour unrest at many of South Africa’s mines contributed towards a decline in Bell Equipment’s profit in the 12 months to December last year.
These factors caused disruptions to mining production, which in turn resulted in orders for equipment not being fulfilled.
The group’s profit after tax declined 15 percent to R205.7m compared with a year earlier.
Bell said this was a particularly disappointing performance because sales had increased by 11.4 percent to R6.3bn and overall gross profit in rand terms had improved by 13.4 percent to R1.43bn.
He said the improvement in gross profit was unfortunately more than offset by increased expenses stemming largely from an increased salary and wage bill, underrecovery of fixed overheads and currency losses in the second half of the year under review.
Operating profit declined by 7 percent to R340m.
Diluted headline earnings a share slid 19 percent to R1.88.
Bell said the company had decided against declaring a dividend because of the rapid decline in profit after tax in the second half of the financial year to R49m from R157m in the first half and the significant cash outflow during the year.
The R120m outlay required to buy back the empowerment shareholding and a R69m strategic once-off forward purchase of components and machines resulted in a negative cash flow for the year of R516m.
But Bell said it had to curtail production at the plant because of the reduced demand for its product caused by the lower demand for commodities.
Bell said the group had not reduced the size of its workforce and emphasised the huge costs involved in retraining people.
He said the group would be assessing the market over the next few months but its order book was looking a bit stronger, particularly from the North American market.
Bell said the group’s re-entry last year into the lucrative US market had proceeded very well and sales volumes were better than expected.
The group employed a further 200 people at its Richards Bay manufacturing plant last year because of its re-entry to the US market.
North American sales came to R337m for the year, off a base of zero the year before.
Bell Equipment’s shares rose 2.34 percent on Friday to close at R18.79. - Business Report