PETALING JAYA: Cable and wire manufacturer Southern Cable Group Bhd
(SCGB) is expected to weather the volatility in copper prices through the use of contracts with different expiry dates and fixed volumes, while any tariffs imposed on exports to the United States will either be absorbed by the importers or passed on to end-consumers.
Apex Securities, which recently made a visit to the company’s plant in Kuala Ketil, Kedah, said market concerns over margins due to rising copper prices have been effectively mitigated by its strategic use of multiple London Metal Exchange or LME contracts with different expiry dates, enabling a better hedge against adverse price movements.
The research house shared that customer contracts with three-month buffer periods also allow the company to submit quotations based on recent raw material cost trends.
This ensures orders would be priced according to daily rates, along with foreign exchange and other cost components.
While there were short-term price mismatches, the impact remains minimal due to fast order turnover and strong operational efficiency.
Geopolitical tensions have driven copper, a raw material used for the production of cables and wires, to the year’s recent high of US$9,982 per tonne on the LME on March 27.
It stood at US$9,104 per tonne on April 21.
SCGB’s management also clarified that the US distributor of its products “is prepared to absorb the full 10% tariff” and shared that should the earlier proposed 24% tariff be imposed, then the costs would either be borne by the importer or passed on to the end consumer.
The United States recently imposed an across-the-board 10% tariff on all imports to the country.
“There is no impact on SCGB’s margins. Even with the 24% tariff fully factored in, SCGB’s offerings remain attractive in the US market, supported by strong product quality and cost-efficient production.
“Consequently, management remains confident in the US outlook. It has maintained its financial year ending Dec 31, 2025 (FY25) sales target of RM100mil (up from RM40mil in FY24),” it noted.
Apex Securities also noted the company has benefitted from Tenaga Nasional Bhd, excluding financially distressed suppliers under its latest contract cycle.
Management also shared that the capacity expansion of the Kuala Ketil plant remains on track. Apex Securities has a “buy” recommendation on the stock, with an unchanged target price of RM1.71 a share.
