With the rupee hitting a record low against the dollar, consumer durable industry is concerned about its margin pressures ahead of the festival season. This comes at a time when the players are expecting some relief on softening commodity prices.
Deepak Bansal, Vice-President-Home Appliances & AC, LG India said, “We are reviewing the macro-economic trends every fortnight. While we have seen some softening in commodity prices in recent times, the entire industry is now facing the challenges posed by dollar appreciation. In some ways, this is offsetting any benefits seen due to easing of commodity prices.”
Experts said this could impact the festival pricing strategies of white goods makers. Avneet Singh Marwah, Director, Super Plastronics Pvt. Ltd said, “Dollar appreciation is giving hard time to consumer durable and electronics players as it has happened quite swiftly. With softening of commodity prices, it was expected that companies will get some relief and be able to make good festival offers. But dollar appreciation may impact festival pricing strategies.
Depending on the product category, contribution of imported components to finished goods ranges between 20-60 per cent.
“Commodity prices such as steel, copper and aluminium have eased to some extent in recent times. But since we are a high import dependent industry, dollar appreciation has an impact. If one looks at the net impact of these two factors, as of now there is a gain of merely 1.5-2 per cent. Costs for the industry due to hardening of prices of commodities increased by nearly 35 per cent over the past few months but only about 17 per cent was passed on to consumers. So there is still a gap, “ said Kamal Nandi, Business Head and Executive Vice President, Godrej Appliances.
Eric Braganza, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA) pointed out that despite softening commodity prices, companies may see the positive impact by August with carrying over of inventories bought at higher prices. “ Dollar appreciation is bound to impact margins varying from company to company. With softening of commodity prices, it was anticipated companies offering attractively to boost demand during festival time. But now, one will need to wait and watch. The companies purchased raw materials on 60-90 days L/Cs and if they are getting realised now,will definitely see an impact ,” he added.