Updated January 30th, 2024 at 21:47 IST
Red Sea crisis: RR Kabel faces major export delays, over half of exports affected
Red Sea crisis, marked by attacks on merchant ships by Yemen's Houthi militia and subsequent US retaliatory strikes, has heightened tensions in the Middle East.
RR Kabel export delays: RR Kabel, one of India's leading wires and cables manufacturers, is facing significant export delays, with up to half of its exports affected by the ongoing Red Sea crisis. Despite the challenges, the company is mitigating higher freight costs by implementing strategic price hikes, according to statements from the company's Chief Financial Officer, Rajesh Jain, on Tuesday.
The Red Sea crisis, marked by attacks on merchant ships by Yemen's Houthi militia and subsequent US retaliatory strikes, has heightened tensions in the Middle East. As the conflict unfolds alongside the Gaza war, companies like RR Kabel are compelled to reroute shipments, causing delays and increased shipping rates.
"We have no option but to reroute supplies. The cycle will be delayed, and we don't know how much time it would take to normalise," stated CFO Rajesh Jain, estimating that approximately 40 per cent-50 per cent of the company's exports are currently affected.
RR Kabel, which derived 27 per cent of its revenue from exports between April and December, is actively rerouting shipments to key export destinations. However, this rerouting adds 10-15 days to the typical travel time of 25-30 days to Europe and the United States.
Jain's disclosure regarding the export challenges led to a 3 per cent decline in the company's share price. Despite the increased cargo costs, Jain remains confident, stating, "Since I can pass on this price to my customer, it will not have an impact on my bottom line." He added that there is no observed price sensitivity from buyers.
While RR Kabel's rival, Polycab, has also noted extended delivery timelines (with 8 per cent of revenue from exports), Havells India, which garnered 3 per cent of revenue from exports in the last fiscal year, reported no significant impact.
Jain's statements followed RR Kabel's recent quarterly profit drop, primarily attributed to higher copper prices. However, the company did not indicate any revenue impact from the Red Sea crisis, as its revenue increased by 10 per cent to Rs 1,634 crore.
The shares of RR Kabel ended 2.96 per cent lower at Rs 1,435.00 apiece on the NSE on Tuesday, January 30.
(With Reuters inputs.)
Published January 30th, 2024 at 21:47 IST