T

he growing use of wireless technology in the telecommunications sector is making conventional cable, which uses copper, virtually obsolete, with demand for the product steadily declining.

Cable manufacturer PT Supreme Cable Manufacturing and Commerce (SCCO), whose products include electricity cables, telecommunication cables and enamel wire, has decided to delve further into the fiber optic business this year.

Bayu Adiwijaya Soepono, a director at SCCO, said the adoption of wireless technologies by major telecommunication companies had caused demand for traditional telephone cables to decline.

'We were known as one of the largest telephone cable manufacturers. But that product has become obsolete because of wireless technology, which utilizes fiber optics,' he said.

To adapt to changes within the telecommunications sector, Bayu said, the company planned to invest US$5 million to purchase machines to enable it to manufacture fiber optic cables.

'We need to do this because manufacturing fiber optic cables differs greatly from producing regular telecommunication cables,' he said.

Last year, telecommunication cables contributed 10.84 percent to SCCO's annual sales revenue, which touched Rp 3.5 trillion. The majority of its revenue ' 77.62 percent ' came from the sale of electricity cables, while enamel wire contributed the remaining 11.5 percent.

However, although the sales revenue for 2012 saw a 5.3 percent year-on-year increase, sales revenue for the first quarter of 2013 dropped 16.7 percent year-on-year to Rp 740.8 billion.

This decrease led to a 50.4 percent decline in operating profits and a 50.7 percent fall in net profits, which reached Rp 51.2 billion and Rp 39 billion, respectively.

Nicodemus M. Trisnadi, another director at the company, said the slump in net profits in the first quarter was not related to poor business performance.

'We recorded abnormally high profits in 2012 due to the massive selling of our old stock during that period. In the following quarter, net profits returned to their normal volume, reaching Rp 30 billion on average for each quarter,' he said.

'Thus, booking Rp 39 billion in the first quarter is quite an achievement,' he said.

He added that this year, the firm sought to earn sales revenue that closely matched last year's, while augmenting net profits by approximately 18 percent to Rp 200 billion.

'We expect to sell around the same volume as last year. However, we expect better profit margins because we will be selling products at the same price although the cost of raw materials has fallen,' he said.

Based on London Metal Exchange (LME) prices posted on June 7, aluminum touched $1927.5 per metric ton at the close of the first trading session, declining 11.5 points compared to closing prices the previous day.

For the same period, the price of copper dropped 110.5 points to $7311.0 per metric ton.

Nicodemus added that the company sought to increase its production of copper cable and aluminum (for cable wrapping) through the purchase of new machines, partly funded by their Rp 80 billion in working capital.

'Last year, we manufactured approximately 18,000 tons of copper, which we plan to increase by 20 percent by the end of the year,' he said.

'As for aluminum, we expect to double our 4,000 ton production volume to meet orders placed by state-owned electricity company PT PLN,' he said, adding that the firm had already secured the PLN contracts.

PLN contributed 1.24 percent to the manufacturer's sales revenue in the first quarter of the year.

He added that SCCO sought to focus on the domestic market because of its rapid growth.

'We have recorded three years of growth largely owing to the local market and, therefore, we want to maintain our focus here,' he said.