L'Oreal praised in report on cost inflation

By Guy Montague-Jones

- Last updated on GMT

Related tags Cost

L'Oreal received special praise in an ING financial report that
predicts significant energy price rises in the coming years and
expects large companies to be the best placed to absorb the cost
inflation.

ING's financial analysts predict that energy and ingredient price rises will push input prices up 40 per cent by 2020 for companies in the food and personal care sectors.

Unilever and L'Oreal were picked out as two large personal care companies that are well placed to fight cost inflation while ING were less confident about Beiersdorf and Henkel.

Analysts feared that the Germany-based companies would endure headwinds from oil price increases and higher packaging costs.

ING estimated that energy costs as a percentage of sales were 19 per cent at Henkel compared to 12 per cent at L'Oreal, making Henkel more vulnerable to increases in energy prices.

Higher input costs are only problematic for a company if it is unable to pass them on to the consumer.

ING listed L'Oreal as one of four companies in food and personal care that are best positioned to pass input price rises on to consumers.

The financial analysts expect small- and medium-sized companies to suffer from the impact of higher energy and input prices on the costs of manufacturing, packaging and distribution.

However, ING sees opportunity for large companies that are better able to adjust and leverage the inflationary environment to their advantage.

"The virtuous inflationary cycle is created as leading consumer goods players translate higher input prices into accelerating sales in premium brands and developing markets," the report stated.

Small- and mid-sized companies overall are likely to see their bottom-lines hit harder by cost inflation because they are less able to offset higher costs with greater sales and transitions to high margin brands

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