Fuel price hike to hit cos’ margins
Reeba Zachariah & Namrata Singh | TNN Mumbai: Profit margins of corporates will be impacted by the fuel hike as companies have no choice but to hold on to the price line, at least for the short term. Companies across sectors will have to shell out more in transportation costs with fuel prices going up. The government on Friday deregulated petrol prices, which were increased by Rs 3.5/litre at current crude prices, in addition to hiking diesel prices by Rs 2/litre. TOI spoke to a cross-section of CEOs across sectors such as cement, metals, hotels and consumer durables and most felt that companies would have to bear the burden of the hike in petroleum prices as they would not be able to pass on the increase to consumers for the moment. ‘‘This was inevitable,'' said H M Bangur, managing director, Shree Cement, while adding that this would lead to a cost increase of Rs 2 per 50 kg bag for cement companies. ‘‘Our bottomline will be impacted as expenses will go up as a result of the rise in fuel prices,'' said Sanjay Bhatia, managing director, Hindustan Tin Works. Petroleum products are used to manufacture tins. Companies like Hindustan Tin Works would witness production costs going up in addition to the rising freight costs. According to restauranteur, Ramesh Aidasani, V-P, operations, Vits and Lotus — part of Kamat Hotels — the rise in fuel prices will have an amplifying effect on prices of vegetables, fruits and other commodities. This is expected to have a cascading effect on inflation as well. Most companies are likely to absorb the cost impact, which is why margins of companies would come under pressure. ‘‘Since a glut like situation is prevailing right now, we will not be able to pass on the cost increase to customers. It is a buyer's market. This is going to affect our margins,'' said Bangur, speaking of the cement industry. Pradeep Bakshi, deputy COO, unitary products business group, Voltas, said it is yet to decide on whether prices need to be raised or not. ‘‘We had increased prices of our products twice in the last four months, because of the rise in raw material costs (copper, steel, aluminium) and strengthening of the US dollar,'' said Bakshi. -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
