Private label household products firm McBride (MCB) has warned of emerging signs of shortages in global supply chains. It also said it would raise prices or add surcharges to recover increases in its input costs.
Shortages increasing
The company, which makes own-label supermarket cleaning products, gave investors a first-hand account of the impact of the Middle East crisis. The firm said there was little effect on trading yet, but haulage costs had risen due to fuel price hikes.
However, ‘these conditions have now started to change’, with the most heavily impacted chemical and packaging suppliers raising prices. This to cover rising feedstock prices and the higher cost of energy used in chemical and packaging production.
More worryingly, McBride warned ‘the first signs of possible shortages in supply chains around the world are beginning to emerge’. As a result, input costs in April are already ‘elevated’ and are expected to rise further ‘in the near future’.
Strategic acquisition
The trading update came alongside news the firm had agreed to acquire European cleaning products firm Eurotab. The deal, which was struck at €40 million (£35 million), will bring in extra annual revenue of around €65 million.
The acquisition is part of McBride’s strategy to grow its position as a leading European detergent producer. Absorbing Eurotab will deepen relationships with key clients and provide an opportunity to expand eastward via its Turkish business.
McBride CEO Chris Smith said the deal would be ‘immediately earnings accretive from completion and deliver meaningful synergies’. The cost is being met from existing cash and banking facilities and doesn’t impact the current share buyback.
This is an important update from McBride as it’s the first to mention the impact on prices and supply chains. Cleaning products are a basic household purchase and white label products represent a large chunk of the market.
The firm has already told customers it will raise prices temporarily, and retail demand should be fairly resilient. The danger is price rises become start to become embedded, which leads to increasing inflation expectations among the public.
Also concerning is the fact signs of stress are already starting to emerge in supply chains. We’ll keep our eyes peeled for more updates in the coming weeks.
Read the press release here: https://www.mcbride.co.uk/investors/overview/
