ON 9 Apr 2025, President Trump revised his trade policy by suspending the country specific tariffs and implementing a universal 10% tariff on most imports for a 90-day consultation period.

The management of Kedah-based Southern Cable Group Bhd has clarified that their US distributor is prepared to absorb the full 10% tariff imposed by the US, according to Apex Securities Sdn Bhd.

“Should the tariff revert to the earlier proposed 24%, the incremental cost is expected to be borne by the importer or passed through to end-consumers. There is no impact on SCGB’s margins,” Apex Securities said in a report released today following its recent visit to the company’s manufacturing plant in Kuala Ketil, Kedah.

It said even with the 24% tariff fully factored in, Southern Cable’s offerings remained attractive in the US market, supported by strong product quality and cost-efficient production.

Consequently, it said Southern Cable’s management remained confident in the US outlook, maintaining its FY25 sales target of RM100 million, up from RM40 million in FY24, backed by broader product offerings and increased capacity allocation.

Apex Securities has retained its ‘Buy’ call with a 52-week target price (TP) of RM1.71. All five analysts tracked by Bloomberg have a ‘Buy’ call on Southern Cable, with a consensus TP of RM1.71.

At 10.20am today, the counter was down 2 sen or 2% to RM1.01.

The cables and wires produced by Southern Cable are used across various industries that range from power distribution and transmission, building and construction, infrastructure, telecommunications, manufacturing and processing industries including oil and gas processing and petrochemical plants.

The report noted that two new aluminium cable products were currently pending UL Solutions certification required for exports to the US, expected to be certified by 3Q25, with the US export market accounting for less than 10% of total revenue in FY24.

The report said Southern Cable’s operations remained busy, with production running 24/7 and utilisation rates averaging between 70-80%.

It said it was currently managing a steady flow of orders, primarily from data centre (DC), renewable energy (RE) related engineering, procurement, construction and commissioning (EPCC) and infrastructure contractors.

In the DC segment, it said demand for low voltage copper cables remains strong, with most orders requiring tight turnaround times of under five weeks. Since last year, SCGB delivered about RM300 million in this segment.

On margin pressure concerns, it said Southern Cable has effectively mitigated it through strategic use of multiple LME contracts at different times with fixed volumes.

The staggered approach enables the group to hedge against adverse price movements more effectively, as it reduces exposure to price volatility at any single point in time.

It noted that Southern Cable’s long-term customer contracts typically include a three-month buffer period, allowing them to submit quotations based on recent raw material cost trends.

Purchase orders are priced according to prevailing daily commodity rates, along with forex and other cost components. While short-term mismatches between input costs and pricing may occasionally occur, the overall impact remains minimal, supported by fast order turnover and strong operational efficiency, it added. –TMR