Procter Gamble, Ericsson warn of more cost pressures

Diapers to yogurt, global firms face higher costs amid supply-chain woes Reuters - Results from companies Procter Gamble Co and Danone SA as well as phone maker Ericsson on Tuesday show higher costs and supply chain disruptions signaling more margin pressure for global firms and higher prices for shoppers.

Panic buying at the start of the pandemic led to mass shortages of everything from toilet paper to packaged foods. Global lockdowns and labor shortages caused the supply chain movement to crimp and clogged doors between China and California.

Many companies have leaned on price increases to offset higher prices for materials needed to make and ship essential necessities like diapers and bottled water. Executives and analysts have said price increases will persist into the next year.

Procter Gamble, which noted its first quarter operating margins were squeezed, now expects a hit of about $2.3 billion in expenses this fiscal year compared to a prior forecast of about $1.9 billion.

The company blames higher raw material costs as well as higher diesel and energy prices for the dispute and said it does not expect these issues to ease up anytime soon.

Danone, which sells Activa yogurt and Evian bottled water, warns of rising inflationary pressures next year after sticking to its 2021 outlook on Tuesday, pledging its operating margins will be protected by productivity gains and price increases.

As just about everyone in the sector and beyond, we see inflationary pressures across the board. What started with increased inflation on material costs turned into widespread constraints affecting our supply chain in many parts of the world, said Danone's Finance Chief Juergen Esser.

Sweden's Ericsson told investors on Tuesday global supply chain issues will still be a major hurdle for investors.

Late in Q 3 we experienced some impact on sales from disturbances in the supply chain and such issues will continue to pose a risk, Chief Executive Officer B rje Ekholm said in a statement.

The company was not able to deliver certain hardware to its customers because of a chip shortage by suppliers coupled with logistics problems, it said.

Tesla Inc. is due to report results on Wednesday. Investors are closely watching the carmaker's margins. Chief Executive Officer Elon Musk has previously said that the company is investing heavily to fly car parts around the world to meet demand while at the same time working to cut costs at its factory in China by sourcing more local parts.

Some investors want to see how those costs add up.

I think that there is probably headwind to margins. They're paying more for components, said Gene Munster, the managing partner at an investor. Lease Investments is part of the venture capital firm Loup Ventures. If they could raise Auto Gross Margin in this environment, I think that would be a huge positive.