Summary: From diapers to yogurt, global companies are struggling with rising costs and supply chain difficulties

Summary: From diapers to yogurt, global companies are struggling with rising costs and supply chain difficulties

Procter & Gamble (P&G) PG.N and Danone (Danone) DANO.PA and mobile phone maker Ericsson (Ericsson) ERICb.ST announced their results on Tuesday, showing increased costs and supply chain disruptions, indicating global companies Faced with greater pressure on profits, shoppers face higher prices.

Panic buying at the beginning of the epidemic caused a large-scale shortage of everything from toilet paper to packaged food. The global blockade and labor shortage hindered the flow of supply chains and caused persistent blockages from China to California ports in the United States.

Many companies rely on price increases to offset the increase in raw material prices and transportation costs for basic necessities such as diapers and bottled water. Business executives and analysts said that the situation of rising prices will continue into next year.

Procter & Gamble has previously pointed out that its operating profit margin in the first quarter was squeezed, and currently expects expenditures for this fiscal year to reach approximately US$2.3 billion, compared with previous forecasts of approximately US$1.9 billion.

The company blamed this on raw material costs and rising diesel and energy prices, and said it does not expect these problems to be alleviated anytime soon.

Danone, which sells Activa yogurt and Evian bottled water, maintained its outlook for 2021 on Tuesday, promising to increase productivity and price hikes to protect operating margins, while warning that inflationary pressures will increase next year.

“Like everyone inside and outside the industry, we see full-scale inflationary pressures. At the beginning, raw material cost inflation increased, and then it evolved into widespread restrictions, affecting our supply chain in many parts of the world,” Danone Finance Director Juergen Esser Said.

Sweden’s Ericsson told investors on Tuesday that global supply chain issues will remain a major obstacle.

“At the end of the third quarter, we experienced some of the impact of supply chain disruption on sales, and such issues will continue to pose risks,” Ericsson Chief Executive Bao Yikang said in a statement.

The company said that due to supplier shortages of chips, coupled with logistics issues, the company was unable to deliver certain hardware to its customers.

Electric car manufacturer Tesla TSLA.O will announce its results on Wednesday. Investors are paying close attention to its profit margins. CEO Elon Musk previously stated that the company is spending a lot of money to airlift auto parts around the world to meet demand, while trying to reduce the cost of its Chinese factories by purchasing more local parts.

Some investors want to know how these costs increase.

“I think there may be an adverse impact on profit margins. They are paying more for parts,” said Gene Munster, one of Tesla’s investors and managing partner of venture capital firm Loup Ventures. “I think if they can increase the gross profit margin of cars in this environment, it will be a huge benefit.”

James Saenz has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. He is an active day trader spending the majority of his time analyzing earnings reports and watching commodities and derivatives. James gives us an insight into the latest Analyst news hitting the business and financial markets in Wall Street.


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