Brokerage houses and analysts have cut earnings and profit margins estimates of consumer product companies, saying these firms will not be able to pass on further cost hikes to consumers as it could trigger a demand slowdown. Increased pressure on household budgets due to rising inflation amid the Ukraine crisis is already impacting demand, they said.
“There is limited scope to fully pass on the raw material inflation, considering the steep price hikes already taken,” ICICI Se. Prices of key raw materials including crude and agri-commodities have increased sharply in the past three weeks since Russia’s invasion of Ukraine, adding to already steep inflationary trends.
Crude oil prices have surged 30% quarter on quarter in the ongoing quarter, while prices of ingredients and packaging materials such as wheat, corn, aluminum, and high-density polyethylene (HDPE) have increased between 9% and 48% year on year.
“The situation is extremely volatile due to the ongoing geopolitical environment, and the pressure on margins remains,” said Ankush Jain, chief financial officer at packaged consumer goods company Dabur, which makes Vatika shampoo and Real juice.
