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Higher prices for beauty products and household durables expected as raw material get dearer



  

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Monday, 02 May 2011
Some basic durable goods are beginning to see their prices shoot up as the effects of rising commodity prices constrict producers from lowering the selling prices of their products.
Some of those producers and the types of products talked about here are companies like Electrolux and SCA Hygiene.
Due to rising prices of steel and plastic refrigerators are seeing their selling prices also going up. Electrolux has already increased its prices in North America, and Europe has negotiated with the store chains.
For SCA’s products includes the products such as diapers and feminine hygiene products will rise in price.

Electrolux seems to have been hit hard by rising raw materials which has contributed to its shares performing as one of the worst so far this year among large companies.

The interim report which was released last week showed that profits were halved to Skr637 million before tax. Turnover fell slightly. The main way to improve profits is to raise prices.

“Since 4 April we have raised prices by between 3 and 5 percent in North America,” explains Keith McLoughlin, CEO of Electrolux.

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In Latin America and Europe, the company has commenced discussions with its dealers to raise prices. And Keith McLoughlin notes that price increases are a theme for the entire industry - including Electrolux's competitors which are also talking about raising prices as raw materials become more expensive.

But prices will be increased when older, cheaper products would be replaced with new, more advanced products. To maintain profits, the company sees also a rise in their costs, but there are no plans for big savings packages.

Electrolux estimates that the cost of raw materials, including plastics, will rise persistently in 2011 than they were last year. Keith McLoughlin still thinks that the situation of the company would improve in the second half of this year.

“Prices of raw materials will be better, while we see that demand is increasing. During the third and fourth quarter, we also have had an impact on our prices and above all have a product mix with higher average prices.”

Other consumer goods are also being tipped to become more expensive as commodity prices rise. Forest industry group SCA announced in conjunction with the report last Friday that it will increase prices of products including diapers, incontinence pads and paper.

CEO Jan Johansson expects that competitors must follow suit to recover its costs, and therefore believe that there will be no problem to raise prices.
In SCA's case, increased costs for raw materials is expected to expand by Skr1.3 billion in the first quarter, compared to the same period last year.
By Scancomark.se Team



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