 "India Inc see raw material costs beginning to fall")
India Inc has seen its raw material cost as a percentage of sales coming down in the June-September period, after many quarters. As the impact of falling commodity prices has yet been yet reflected in the results, the coming quarters should see a further fall in raw material costs.
In the September quarter, India Inc’s raw material cost (including fuel and power) fell four per cent compared to that in the same quarter of 2013-14. In the December and March quarters, this cost had grown by 15.3 and 17.5 per cent, respectively. In the June quarter, it rose 8.7 per cent. The fall in the September quarter is from the results of 138 companies (ex-services sector) that have declared results so far.
Dharmesh A Mehta, deputy chief executive of Axis Capital, said: “The impact of the fall has yet not been fully reflected in the results as several companies have contractual arrangements entered earlier. We would see that (full impact) happening in the coming quarters.” He also said several companies had implemented cost cuts which were yet not fully reflected in their balance sheets.
A strengthening dollar (on expectations of a rise in interest rates; commodities also have an inverse relation to the currency) and slowing growth in major regions such as Europe, China and Japan are major factors resulting in lower commodities prices. In the September quarter, the CRB/Reuters spot index of industrial raw materials fell 3.45 per cent. Measured from July, the index is down five per cent. According to Platts' data, Asian petrochemicals' prices had tumbled to multi-year lows by mid-October, in line with the fall in crude oil.
This means lower commodities prices going forward.
In the September quarter, India Inc’s raw material cost (including fuel and power) fell four per cent compared to that in the same quarter of 2013-14. In the December and March quarters, this cost had grown by 15.3 and 17.5 per cent, respectively. In the June quarter, it rose 8.7 per cent. The fall in the September quarter is from the results of 138 companies (ex-services sector) that have declared results so far.
Dharmesh A Mehta, deputy chief executive of Axis Capital, said: “The impact of the fall has yet not been fully reflected in the results as several companies have contractual arrangements entered earlier. We would see that (full impact) happening in the coming quarters.” He also said several companies had implemented cost cuts which were yet not fully reflected in their balance sheets.
A strengthening dollar (on expectations of a rise in interest rates; commodities also have an inverse relation to the currency) and slowing growth in major regions such as Europe, China and Japan are major factors resulting in lower commodities prices. In the September quarter, the CRB/Reuters spot index of industrial raw materials fell 3.45 per cent. Measured from July, the index is down five per cent. According to Platts' data, Asian petrochemicals' prices had tumbled to multi-year lows by mid-October, in line with the fall in crude oil.
This means lower commodities prices going forward.