Rising energy prices will hurt companies’ profit margins: IMA Asia
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The cooling towers of RWE’s coal-fired power stations in Weisweiler in western Germany are visible from the electricity poles.
Getty Images| AFP | Getty Images
A management consultant stated Wednesday that rising energy costs will lead to higher business costs for companies and lower profit margins around the globe.
Prices of energy commodities — including oil, natural gas and coal — soared in recent weeks as supply remains tight and demand rebounds from a Covid-induced slowdown. It has also contributed to fuel and power shortages. Europe to Asia.
“It’s a big problem for companies. It will narrow their profit margins because as their input costs go up, the question is how quickly can they raise their selling price,” Richard Martin, managing director of IMA Asia,You can find more information hereld CNBC’s “Squawk Box Asia“
China, India could be at high risk
Martin stated that companies in America have better chances of protecting their profits because there is a very buoyant consumer market. He also said it would allow them to quickly raise sales prices.
The consultant said that people in other countries have worse prospects.
We don’t have a strong consumer market in many of the countries we visit. China, and in fact most of East Asia are in this area, is one. Martin said that costs increase, and profit margins decrease.”
India faces a similar risk. Martin said that while the Indian stock exchange has seen a surge, the South Asian nation will not be able to absorb the cost to the consumers.
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