Tag Archives: raw materials

U.S. companies to keep prices high as supply chain headaches persist

NEW YORK (Reuters) – The largest U.S. manufacturers including General Motors, General Electric, 3M and Boeing face logistics headaches and higher costs due to global supply bottlenecks that are likely to persist into next year but agreed the hit to profits can be mitigated by charging higher prices for their goods.

Companies across the globe sounded the alarm on supply issues months ago that have pushed prices higher on raw materials from chemicals to steel.

In earnings reports this week investors got a closer look at how companies are managing.

“It starts with really strong price,” said GM Chief Executive Officer Mary Barra in a call with reporters. “We were able to do very well (with) full-size trucks and full-size SUVs. We just can’t build enough of those vehicles.”

GM is also looking to wring efficiencies from its supply chain and she said the chip shortage is likely to improve in the second half of 2022.

Larry Culp, the chief executive of General Electric Co, a maker of jet engines and wind turbines, told investors keeping up with fits and starts in the global supply chain was akin to playing a carnival game that aims to keep players on their toes.

“I’m not sure we’re yet at a place where we would say that things are stable,” Culp told investors on an earnings call on Tuesday. “It really is akin to playing a whack-a-mole.”

General Electric also expects supply constraints to persist through the rest of the year and in 2022, hurting profit in its healthcare business. Boeing Co also complained of a “severely weakened supply chain.”

The pandemic has crippled many companies’ ability to send and receive the parts and supplies needed to make a wide range of products, creating shortages, reducing inventories and hammering profits.

On Wednesday, Harley-Davidson said it increased surcharge pricing in the United States to offset higher raw material costs. The motorcycle maker expects these costs to remain high and is exploring higher surcharge costs globally.

Harley-Davidson said the inventory shortage is also squeezing its international market share.

McDonald’s Corp also said it had to raise prices in the United States.

Industrial giant 3M Co cut its full-year earnings outlook on Tuesday and said it would increase product prices to combat inflationary and supply chain pressures.

The company, which makes a long list of building and construction products, said it was facing higher costs related to polypropylene, ethylene, resins and labor. It added that the global semiconductor crunch would continue to weigh on its automotive and electronics end-markets.

On Tuesday, Lockheed Martin Corp dramatically lowered its sales expectations for this year, saying the pandemic has hobbled the top U.S. defense contractor’s supply chain. Its shares fell more than 11% on Tuesday.

Lockheed’s chief financial officer said the problem worsened for them over the last two months, as the maker of the F-35 fighter jet lowered its 2021 revenue expectations by 2.5% to $67 billion and said next year’s revenue could fall to $66 billion.

(Reporting by Reuters staff; Writing by Bernard Orr; Editing by Andrea Ricci)

U.S. manufacturing output accelerates in May on autos

WASHINGTON (Reuters) – Production at U.S. factories increased more than expected in May as motor vehicle output rebounded, but shortages of raw materials and labor continue to cast a shadow over the manufacturing industry.

Manufacturing output accelerated 0.9% last month after dipping 0.1% in April, the Federal Reserve said on Tuesday.

Economists polled by Reuters had forecast manufacturing output increasing 0.6% in May. Manufacturing, which accounts for 11.9% of the U.S. economy, is being underpinned by massive fiscal stimulus, low interest rates and continued strong demand for goods even as spending is shifting towards services amid a vastly improved public health situation.

But robust demand is straining the supply chain, with shortages of raw materials and labor across the industry.

The automobile industry has been hit by a global shortage of semiconductors, which has forced some automakers to cut production. Hyundai Motor USA said on Monday it would suspend production at its Montgomery plant in Alabama for a week because of the chip crunch and will “will continue to take necessary measures to optimize production.”

Volkswagen said last week it expected the supply squeeze to ease in the third quarter, though it saw the bottlenecks continuing in the long term.

That suggests the 6.7% increase in production at auto plants last month was likely temporary. Motor vehicle assemblies jumped about 1 million units to an annualized rate of 9.9 million units last month, but remained more than 1 million units below their average level in the second half of 2020.

Excluding autos, manufacturing output rose 0.5% last month.

The rebound in manufacturing output combined with a 1.2% increase in mining and a 0.2% gain in utilities to boost industrial production by 0.8% last month. That followed a 0.1% rise in April.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, rose 0.7 percentage point to 75.6%. Overall capacity use for the industrial sector was up 0.6 percentage point to 75.2%. It is 4.4 percentage points below its 1972-2020 average.

Officials at the U.S. central bank tend to look at capacity use measures for signals of how much “slack” remains in the economy — how far growth has room to run before it becomes inflationary.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

Campbell Soup lowers annual profit forecast as costs rise

By Nivedita Balu

(Reuters) -Campbell Soup Co on Wednesday slashed its forecast for annual earnings after the company’s quarterly results fell short of estimates, hurt by higher costs related to raw materials and transportation.

The canned soup maker’s shares fell about 6% to $46.30.

Campbell, known for Swanson broth, Prego pasta sauces and Pepperidge Farm cookies, expects higher costs to hurt margins even as it plans price hikes for later this year.

Shipping logjams globally and surging demand on the back of a resurgent U.S. economy have led food manufacturers to sacrifice their profit margin as costs rose for items across the board.

“We expected this to be a challenging quarter … but it was made even tougher by several additional factors,” Campbell Chief Executive Officer Mark Clouse said, adding that he expects price price increases to offset some margin pressures.

Campbell also struggled with production and supply disruptions due to the winter storms in Texas earlier this year.

Price hikes are a “cold comfort” and expect investors to view food companies with a skeptical eye in the next few quarters, J.P. Morgan analyst Ken Goldman said.

Campbell forecast fiscal 2021 adjusted earnings between $2.90 and $2.93 per share, compared with its prior forecast of $3.03 to $3.11 per share. It expects sales to fall at least 3.0%, compared with the minimum 2.5% fall projected earlier.

The company, which saw an uptick in demand during peak pandemic from consumers staying at home, said sales of snacks fell 8% in the third quarter, while sales of its soups and pasta sauces fell 14%.

On an adjusted basis, Campbell earned 57 cents per share, missing estimates of 66 cents, according to IBES data from Refinitiv. Net sales fell about 11% to $1.98 billion, compared with estimates of $2.00 billion.

(Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta)