Commodity Inflation starts to hurt Indian Consumer Companies (HLL,Ceat)

Inflation in India is raging at double digit levels as it is in most of the other countries in Asia.While Food Inflation has been hogging the headlines as Onion Prices become costlier than the daily earnings of the majority of Indians, other commodities are becoming expensive as well.Tyre Companies in India have seen their margins and profits collapse on the back of higher natural rubber prices.This is despite the explosive growth being seen in the automobile sector in India. JK Tyres and Ceat reported their quarter results and both were equally bad with stock prices taking a major hit.Consumer giant HLL which is a subsidiary of the Unilever Group and the largest consumer company in India also saw its stock price tumble.HLL too has been hurt by higher input commodity costs.While volume growth was excellent,the margins got compressed as input prices increased faster than output prices.Note the Indian stock market has fallen more than 10% of its peak even as developed markets are seeing higher peaks.Other Asian markets like Indonesia,Thailand and others too have fallen as high inflation hurts the prospects of companies here.The Central Bank in India RBI raised the intrest rates by 25 bps which some consider as too low.Like other central banks in Asia,India too seems helpless to fight the inflationary pressures brought upon by the higher commodity prices fueled by Bernake money printing.

Hindustan Unilever’s Profit Falls for Second Quarter in Three

Hindustan Unilever Ltd., India’s biggest household products maker, reported profit fell for the second time in three quarters as higher raw material prices eroded gains from the fastest sales growth in two years.Food inflation in India averaged 13 percent in the quarter ended in December. India’s central bank today increased the benchmark interest rate to a two-year high and signaled further gains in borrowing costs as it raised its inflation forecast.

Ceat shares hits year-low on weak earnings

Shares of Ceat Ltd fell more than 5 percent to hit a 52-week low after the company reported a 79 percent drop in its quarterly net profit on Tuesday, two analysts said. The company said its net profit for the quarter was at at 50.1 million rupees as against 240.2 million rupees a year ago.