While rising copper prices are still a concern with global prices increasing about 50% over the last year and slated to rise further in 2011, firms such as Sierra Cables are producing more Aerial Bundle Cables (ABC), stock market analysts say.
“Due to increased demand from China companies such as Sierra are producing more ABC which uses aluminium as the key raw material. Aluminium prices have not appreciated compared to copper, and to that extent they are less exposed to a possible increase in copper prices,” an analyst said.
According to company sources, Sierra invested Rs. 250 million on upgrading its plant facilities during the last two years to meet the capacity for ABC. "During the last two years as we rightly predicted there will be a demand for such building wire.Now we do about 10,000 tonnes of both aluminum and copper wire per annum,” a company source said. ABC cables carry lower maintenance costs, more energy efficient with less energy losses and environment friendly due to heavy insulation.
Analysts say that public and private infrastructure development activities kicking in the post-war development phase of Sri Lanka would also help raise Sierra's future earnings and it is currently upgrading its capacity and facilities to cater to the surge in demand. “Since the demand for these products in the power sector could increase significantly in the future, Sierra should benefit to a great extent,” the analyst said, adding that the company is gradually shifting from Ceylon Electricity Board tender projects towards the dealer (retail) market, where the margins are higher. “Now the company’s profits are Rs 30 million a month as opposed to Rs 4-5 million last year,” the company source said.