Cable firm on right lines

Jan 14 2009 by Peter McCusker, The Journal

THE world’s oldest cable company has had its best year for over a decade after its future was secured following its purchase by an Indian company.

AEI Cables, of Birtley, was bought for £14.5m by New Delhi-based Paramount Communications in September 2007 and its results for the first year under the new tutelage have seen it reverse an extended period of “substantial” loss-making.

Its annual turnover came in at £56.2m with a profit of £2.8m being recorded in the accounts, although the company says this was inflated as a result of accounting rules imposed following the takeover, and the truer figure is nearer break-even.

AEI, which has 300 employees, has ambitious future plans and as well as increasing its UK sales force and re-launching its website, it has just opened a new office in Dubai.

Jim Duffy has been its chief executive for the last six years. He said: “The new owners are cable-makers. Their knowledge of the industry meant the transition was very smooth and they have been given great support from the staff. They understand the cable business and we got off to a flying start.

“We had been making substantial losses for a number of years, but we have now moved to a position where we are breaking even and we are putting in place measures to ensure we enter a period of profitability.

“We have gone from a position of not knowing whether we had a long-term future to one where we have a long-term, secure future, with owners who are proud to own the world’s oldest and best cable-making company.”

The cable industry is one in which the success of its manufacturers is affected by the price of copper and the huge fluctuations in the prices of commodities in recent months has taken its toll on AEI.

In the last six months, its price has fluctuated from $4,000 a tonne to around £2,200 a tonne. The inflated price last summer partly contributed to last year’s turnover figure.

Mr Duffy added: “Things were good until June 2008 but the spike in the price of copper meant our prices had to rise and the companies we supply to reduced their stocks. When the prices began falling, we had to cut prices in order to remain competitive.”

For 2009, AEI do not expect to hit last year’s turnover target, as a result of the copper price fall, and may have to wait until the following year to become profitable.

Mr Duffy added: “If we break even this year, we will be doing very well in the current market conditions. The recession is affecting everyone, but people still want cable. But we are flying the flag for the North East. There have been no redundancies and we have gained customers and our long-term future looks good.”

AEI has been making cables for over 170 years and in June 2007 its then owners, TT Electronics, announced it was quitting cable manufacturing.

It was bought by Paramount Communications, one of India’s largest cable manufacturers, which is owned Sanjay and Sandeep Aggarwal. Sanjay, group chairman and chief executive, told nebusiness.co.uk last year: “When we first visited AEI, we were undecided about whether we would pursue our initial interest.

“But what we saw was something that was part of history. A company which was started in 1837. One of the oldest cable companies in the world.

“This was something that we felt was not just a company, it was an institution that must be nurtured and developed.”