Del Monte hit by canning costs
latest financial quarter, mainly as a result of rising steel prices
- further proof that food manufacturers are feeling the pinch as
steel prices continue to rise, writes Simon Pitman.
The US-based global food giant, which is a major producer and distributor of canned fruit and vegetables, said that its profits for the third quarter fell by 9.3 per cent, prompting the company to again lower its full year earnings forecast.
The news came despite the company growing its sales by 6.2 per cent to $861.3 million against the same period in 2004.
"During the quarter, we continued to experience higher costs driven primarily by inflationary pressures," said Richard Wolford, Del Monte CEO.
Added to the rising cost of canning materials, Del Monte's production costs have also been hit by rising energy costs, which has also contributed to the quarterly net profit to dropping back from $53.5 million in 2004 to $48.5 million this year.
Steel prices have been hit by high demand in the global market, which in turn has led to a constant stream of price hikes during the course of 2004. Experts say that insatiable demand from the China market, where the economy has raced ahead at unprecedented levels, combined with a continuing rise in the cost of raw materials and energy is forcing steel companies to increase their prices, and fast.
As a result all the major steel companies, including Corus, Arcelor and ThyssenKrupp have announced significant steel price increases in recent months. And analysts predict that current pressures could lead steel producers to introduce further price hikes of around 5 per cent, in reaction to sustained demand and pricing pressures.
But there are suggestions the steel industry is likely cool down in the the future after the huge price increases of the past 12 months, which have helped keep steel producers' profits inflated.
Arcelor chief executive Guy Dollé has suggested that world steel consumption was likely to rise only three to four per cent in 2005, as against the expected eight per cent this year.
According to the Financial Times, he said it was "impossible" that price increases would match the 50 to 100 per cent rises for many grades of the metal in the past year.
