Cable and wire manufacturer is targeting RM100 million sales of cables and wires to the United States (US) in the financial year ending 31 December 2023 (FY2023) and will begin deliveries to a US-based cable and wire distributor in the fourth quarter of 2022.
The positive demand outlook for FY2023 is supported by an upcoming distributorship agreement from its US-based customer, following recent successful performance of trial orders.
Additionally, the group has secured UL certification for its heat- and water-resistant industrial cables certifying conformity to US industry requirements, enabling the Group to increase its customer base in the US.
The North America cable and wire market size exceeded USD27.0 billion in 2020, and is projected to expand at a cumulative annual growth rate of 6% from 2021 and 2027 to reach USD44.5 billion, according to market research company Global Market Insights.
For the record, the Malaysian cable and wire market was valued at RM10.3 billion in 2019.
“Gaining entry into a much larger foreign market than our current domestic reach boosts our potential addressable market greatly, and bolsters our reputation for producing world-class cables and wires,” Managing Director of Southern Cable Group, Mr. Tung Eng Hai (photo) said.
“We are in the process of planning our production capacity for anticipated larger orders to the US next year, and are confident of expanding our US customer base, leveraging on our competitiveness and product quality,” he remarked.
“We also have the capability to produce cables and wires for wide-ranging sectors including power distribution, construction, telecommunication, and oil and gas,” he added.
“In our efforts to target more export opportunities to the US, we will continue developing more products and obtaining certifications to cater to a broader range of industry requirements,” he concluded.
Southern Cable has current orders in hand of more than RM800 million to be fulfilled for Malaysia and overseas customers until 2024. The orders in hand include a RM294 million underground power cable supply contract secured from Tenaga Nasional Berhad, and RM12 million worth of purchase orders from its US-based customer.
Meanwhile, at the Group’s Extraordinary General Meeting today, shareholders approved a bonus issue of warrants on the basis of one warrant for every two existing Southern Cable ordinary shares held. The issuance comprises 400 million five-year warrants with an option for warrant holders to exercise one warrant to subscribe for one new Southern Cable ordinary share.
At an indicative exercise price of RM0.28 per warrant and assuming full exercise of the warrants before maturity, the Group is aiming to raise RM112.2 million in gross proceeds for working capital purposes.
Of the RM112.2 million gross proceeds, 80% or RM89.7 million are to be utilised for raw material purchases, while the balance 20% or RM22.4 million are to be utilised for parts, maintenance cost and other related costs for plant, machinery and equipment, as well as operation overheads including labour costs, utilities and other factory overhead expenses.
“The proceeds to be raised from warrants exercise will provide additional working capital to support our business growth and empower us to deliver the orders in hand to our customers locally and internationally. Not only that, the exercise of our warrants can also allow our shareholders to increase their ownership in Southern Cable to participate in our long-term prospects,” Mr. Tung added.
The entitlement date and exercise price of the warrants will be determined and announced by the Board at a later date after all relevant approvals have been obtained.
