Dec 19 Reuters - The results from companies Procter Gamble Co and Danone SA as well as company Ericsson on Tuesday show higher costs and supply chain disruptions, signaling higher 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 crimped supply chain movement and caused lasting log-jams at ports from China to California.
Many companies have leaned on price increases to offset higher prices for materials necessary to make and ship essential necessities like diapers and bottled water. Managers and analysts have said price increases will linger into next year.
Procter Gamble, which recorded its very first quarter operating margins were squeezed, now expects a hit of approximately $2.3 billion in expenses this fiscal year, compared to a prior forecast of about $1.9 billion.
The company says higher raw material costs have caused higher diesel and energy prices, and said it does not expect those issues to ease anytime soon.
Danone, which sells Activa yogurt and Evian bottled water, warned of increasing 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.
Like just about everyone across the sector and beyond, we see inflation pressures across the board. What started with higher inflation on material costs evolved into widespread constraints impacting our supply chain in many parts of the world, said Danone's finance director Juergen Esser.
Ericsson tells investors on Tuesday that global supply chain issues will still be a major hurdle for Swedish investors in Europe.
Late in Q 3 we experienced some impact on sales with 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 due to a chip shortage coupled with logistics problems, it said.
Tesla will report its first earnings on Wednesday after the stock is sold. Investors closely watch the car maker's margins. Chief Executive Officer Elon Musk has previously said that the company is purchasing heavily to fly car parts around the world to meet demand, while at the same time working to reduce costs at its factory in China by sourcing more local parts.
Some investors want to see how these costs add up.
I think that there is probably a headwind to margins. They pay more for their components, said Gene Munster, managing partner of Venture Capital firm Loup Ventures, an investor in Tesla. I think that would be a huge positive if they can increase auto gross margin in this environment.