Crude oil spike could pinch FMCGs hard; operating margins likely to suffer | Business Standard News

Your favourite toothpaste or detergent bar could cost more if crude oil prices continue to rally the way they have in the past month. Between March 9 and now, crude oil has spiked to levels of about $72 a barrel, a jump of 10 per cent. The expectation is that it could cross the $75-mark in the near term as geopolitical issues (the on-going war of words between the US and Russia), and a demand-supply mismatch push up prices, analysts tracking the market said.

Among companies that are affected significantly because of rising crude prices are fast-moving consumer goods (FMCG) players. Crude-linked derivatives such as Linear alkyl benzene (LAB) and high density polyethylene (HDPE) act as crucial inputs for consumer goods companies.

An increase in price of these inputs, says G Chokkalingam, founder, Equinomics Research & Advisory, will mean that production costs will increase putting pressure on companies to raise product prices. “In the event they do not raise product prices, as they could suffer an impact on their margins, notably, operating margins,” says Chokkalingam.

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Crude oil spike could pinch FMCGs hard; operating margins likely to suffer | Business Standard News.

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