KUALA LUMPUR: Cables and wires manufacturer Southern Cable Group Bhd (SCG) is targeting RM50 million in overseas sales in FY24, with most of the sales coming from the United States.
Managing director Tung Eng Hai said that since 2022, SCG has been building a strong delivery track record with a prominent distributor in the US.
He said this opportunity arose amid the US-China trade tensions that began in 2018, prompting US cable and wire distributors to shift their supply chains away from China.
Since 2023, the company has seen demand for cable and wires improving in the US, led by increasing construction activities.
While remaining focused on the domestic market, overseas sales made up only 1.4%, or RM4.2 million, in the first quarter (Q1) of 2024.
The 69.5% decrease in Q1 from a year ago was mainly due to reduced orders from the US, which has had no significant impact on the company.
Tung said SCG’s long-term plan to improve overseas sales includes actively participating in international exhibitions to promote products and expand its client base.
“We also aim to acquire certifications for product compliance with international standards to enhance acceptance in various countries and industries.
“Furthermore, we are also seeking opportunities to collaborate with international distributors to penetrate new markets,“ Tung told SunBiz.
Touching on the domestic market, Tung said since 2023, Malaysia’s cable and wire market has been running at full steam, driven by the government’s efforts to enhance infrastructure and the recent increase in foreign direct investments in data centres and the manufacturing sector.
Tung said SCB has invested in new machinery and enhancements to expand cable and wire production capacity to meet the growing demand for power cables and wires.
“We now command 41,980 km/year in capacity, increasing by 35% from 31,080 km/year since our listing in 2020. Next, we target to reach 46,980 km/year by the end of 2024.
“Our Lot 38 production building, with a planned capacity of 5,000 km/year, has started commissioning in phases from the second quarter (Q2) of 2024 onwards while still undergoing machinery installations,“ Tung said.
Further, by expanding market share, offering competitive pricing, and providing a wide product range, SCG leveraged in-house facilities, including furnaces, to produce copper and aluminium rods used as conductors in its cables and wires.
“Additionally, we have two subsidiaries – Nextol Polymer Sdn Bhd, which produces plastic compounds for insulating our cables and wires, and Daya Forwarding Sdn Bhd, which manufactures wooden cable drums for packaging.
“These in-house supporting activities are much more cost-efficient than outsourcing the processes, allowing us to reduce costs, price our products competitively, and maintain quality standards while ensuring timely delivery,“ Tung said.
SCG’s cables and wires are used for power distribution, transmission, communications, control, and instrumentation applications.
The key supporting activities for the cable and wire manufacturing operations include furnace and casting operations, as well as the manufacturing of plastic compounds and wooden cable drums.
Through its existing factories in Kuala Ketil and Sungai Petani, Kedah, SCG has an annual production capacity of 20,400 tonnes and 18,000 tonnes of aluminium and copper rods, respectively, 41,980km of cables and wires, and 7,800 tonnes of plastic compounds.
Remaining focused on the growing orders coming from the US, SCG recently acquired a 7.9-acre industrial land with an existing building adjacent to its current facilities in Kuala Ketil for RM14 million.
The newly acquired property will enable the company to scale production and meet the increasing domestic and US demand.
“The 7.9-acre industrial land in Kuala Ketil is part of our long-term plan to expand our product range and increase capacity allocation to the US market.
“Design plans for the new facility are underway, and we aim to commence construction in 2025,“ Tung said.
He said SCG operates on a volume-driven business model and by sustaining robust production levels, the company capitalise on economies of scale to enhance profitability.
“As of July 2024, out of the total orders in hand exceeding RM1 billion, approximately 38% consist of short-term supply contracts, typically fulfilled within three months.
“With our current orders in hand, maintaining a utilisation rate above 80% positions us to steadily improve profit margins,“ Tung said.
For the first quarter ended March 31, 2024 (FY24), SCG posted a net profit of RM14.1 million, more than doubling the RM5.1 million recorded in the same quarter last year, marking its eighth consecutive quarter of earnings growth.
Revenue for the quarter stood at RM312.02 million from RM240.93 million posted in Q1 FY23.
SCG is the registered supplier of cables and wires to Tenaga Nasional Bhd, Telekom Malaysia Bhd, Sabah Electricity Sdn Bhd, and Petroliam Nasional Bhd, and supplies to Sarawak Energy Bhd.
