In Charts: Five Commodities That May Hurt FMCG Margins
Earnings and volumes grew for the third straight quarter for most fast-moving consumer goods firms in the three months through March. But the cheer may be short-lived as prices of key commodities continue to rise.
Cost-saving measures helped firms like Hindustan Unilever Ltd. and Godrej Consumer Products Ltd. boost margins in the face of higher input costs in the quarter gone by. Since then, prices of raw materials used by these companies have continued to rise. That may put margins under pressure in subsequent quarters.
Here are five key raw materials widely used by the FMCG companies.
Crude Palm Oil
Palm oil, used to make soaps and skin care products, is trading at an average price of Rs 40,615.9 a tonne. It hit a peak of Rs 44,245.11 a tonne in September last year. Godrej Consumer Products and HUL are among the companies that uses palm oil.
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High-density polyethylene is a thermoplastic used in packaging. It’s used to make containers for shampoos, soap and motor oil. High-density polyethylene is trading at Rs 33.57 a pound, above its average trading price of Rs 32.73 a pound.
Low-density polyethylene is also used in packaging. It’s used to make products such as dispensing bottles and plastic bags. Low-density polyethylene is softer and more flexible compared to its high-density variant.
Titanium dioxide, a crude-oil derivative, is used as a raw material in the paint industry. Its prices are currently on the upswing.
Linear Alkyl Benzene
Linear alkyl benzene is used to manufacture detergents. A derivative of crude oil, the compound has been dearer of late. HUL and Jyothy Laboratories Ltd. are among the companies that uses linear alkyl benzene.