HomeWorld NewsRising energy prices will hurt companies’ profit margins: IMA Asia

Rising energy prices will hurt companies’ profit margins: IMA Asia

Electrical energy pylons are seen in entrance of the cooling towers of the coal-fired energy station of German power large RWE in Weisweiler, western Germany, on January 26, 2021.

Ina Fassbender | AFP | Getty Photos

Rising power costs will enhance enterprise prices and slender revenue margins of corporations around the globe, a administration advisor stated Wednesday.

Costs of power commodities — together with oil, pure fuel and coal — soared in current weeks as provide stays tight and demand rebounds from a Covid-induced slowdown. That has contributed to energy and gas shortages from Europe to Asia.

“It is a massive drawback for corporations. It should slender their revenue margins as a result of as their enter prices go up, the query is how rapidly can they elevate their promoting value,” Richard Martin, managing director of IMA Asia, informed CNBC’s “Squawk Field Asia.”

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India, China could also be in danger

Firms within the U.S. have a greater probability of defending their revenue margins due to a “very buoyant” shopper market, stated Martin, including that it’s going to enable them to boost promoting costs rapidly.

However these in different international locations face grimmer prospects, stated the advisor.

“In lots of international locations around the globe, we do not have such a buoyant shopper market. China is one, in truth a variety of East Asia is in that space. And because the prices go up, the revenue margins go down,” stated Martin.

India can also be in danger. Martin famous that the Indian inventory market has been on a tear, however the South Asian nation will battle to cross on prices to shoppers.

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