Starpol, Greenseal, and Biotec TPS are going to make a lot of shareholders very wealthy over the next few years, and onwards ....
Fuel crisis bites
Analysis: By Julia Fields
It would have been a stellar performance if not for one little wrinkle.
As soon as Tesco chief executive Sir Terry Leahy opened his mouth and admitted that even the mightiest of British companies was not immune to rising oil prices, the retailers market-smashing 18.7% rise in half-year profits faded in importance.
It was not that anyone believed Tesco would be brought to its knees by having 60 million added to its expenses thanks to a rise in oil-related costs like transport. This pronouncement from Britains largest, and arguably best-run, company sent shockwaves through the investment community and the industry because if Tesco made such an admission, the argument went, then others would be feeling the pain too and likely at a far worse intensity.
If Tesco is saying it, it probably means that the other retailers are being affected harder. Tesco is our best retailer.
They are probably buying petrol at the best price that anyone can get it, says Leigh Sparks, professor of retail studies at the University of Stirling.
He adds that the situation is better for supermarkets like Morrisons, Tesco and Sainsburys which sell petrol through their filling stations and also see some revenue benefits from higher fuel prices.
Others are not so lucky.
Flanders explains that some hauliers have had no choice but to pass along their costs to their customers. Every 3p price hike on the cost of a litre of petrol on average leads to 1% increase on hauliers rates.
Retailers are hit in two ways by escalating fuel prices. They source products from all around the world. The transportation costs of these suppliers will increase [and depending on contract terms be passed on], explains Sparks.
Within the continent, they are clearly moving products around from warehouse to distribution centre and then to the shops. The amount of miles they do in a year are formidable.
Rising fuel prices also hit shopkeepers on the demand side. As Tescos Leahy acknowledged last week: The high oil price is a cause for concern because it will feed through to peoples costs and consumer confidence.
The upshot: Britons who are paying more to run their vehicles and heat their homes will not be spending as much on non-essential items. Retail chains are already experiencing a sales slowdown and some have dropped their prices to attract shoppers.
That puts retailers in a difficult position as fuel costs continue to move ever upwards. As Fiona Moriarty, director of the Scottish Retail Consortium, puts it: No retailer wants to increase prices if its going to make their product less competitive.
British Polythene Industries, Europes largest plastic bag maker, expects to raise its prices by as much as 20% for some products to reflect the steep increase in its raw materials, energy and haulage bills. Thats on top of the 20% rise passed to customers at the beginning of 2005.
Cameron McLatchie, BPI chairman, says: Almost half of what we make is used to get goods through the supply chain for the supermarkets. At every stage of the chain, polythene is used. After it is used, its collected and returned to us or other recycling companies and we make it into trash bags and other products.
He argues that the plastics industry worldwide has seen a sharp jump in costs as a result of the effect that the climb in the price of crude oil has had on the petrochemical industry, which makes the polyethylene that the sector uses in its products. That has been exacerbated by recent problems with refineries in the Gulf of Mexico and in Western Europe. I would say the plastics industry is facing the largest one-off increase Ive ever seen and Ive been in this business for 35 years.
The company is bracing for a 200 per tonne increase in the price of raw materials in October. Between the raw material increases, the practical doubling of our energy bill and the hauliers asking for more money to get our products to market our finished goods prices will go up. With some products, itll be a few percent and in other cases it will be as high as 20%.
McLatchie points out that manufacturers of other oil-derivative goods such as glass, for instance, will be having the same problems. And, for that reason, he believes that shoppers at the other end of the supply chain will be hit in the pocket eventually. My belief is there is a pent-up inflationary effect that has to come through at some point to the consumer, he explains.
This is not absorbable for long. Someone has to pay.
25 September 2005
Full article here
http://www.sundayherald.com/51871