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TBC Capital Published A report On Industry Overview

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BM.GE
28.04.22 13:00
475
TBC Capital published a report on Industry Overview. According to the report, as the severity of adverse macroeconomic ramifications caused by the pandemic diminished, earnings of companies representing food and beverages have seen a noticeable rebound, mainly due to reopening of restaurants. However, astronomical rise in agricultural inputs still remains the biggest challenge, with fertilizers and energy costs increasing by 141.8% and 73.6%, respectively.

Pricing of other raw materials such as pulp, resin, aluminum and plastics also surged. Analogous upward movement was apparent for Producer Price Index as well, nevertheless, companies managed to offset the rise in commodity prices via passing the costs on to customers.

Throughout 2016-2021 joint output of Russia and Ukraine for barley, wheat and maize accounted for 19%, 14% and 4% of global production, respectively, hence why ambiguity over the conflict remains as the most alarming risk factor for the industry, which might prolong the input price hike.

Even though, inflationary pressures are expected to persist, given that consumer staples fall on the inelastic side of the spectrum, companies with high margin buffers should be able to smooth out the turbulances caused by input cost volatility. However, shrinkage of sales volume for packaged and fast-moving consumer goods is highly likely, as the previous hike was mainly attributable to lockdown-stimulated increase of at-home consumption.