Rising raw materials affected daily chemical industry Procter & Gamble Unilever are affected

To reduce the $10 billion in costs before the 2016 fiscal year, Procter & Gamble announced plans to lay off 1600 people earlier this month, and recently said that it plans to lay off 4,100 people by June 2013, that is, there will be 5,700 non-manufacturing jobs. The staff was fired, equivalent to 10% of the non-manufacturing staff. Currently, Procter & Gamble has 129,000 employees worldwide.

Cutting costs is the reason for Procter & Gamble's announcement of layoffs. It is expected that the above layoffs will save the company $800 million in expenses. P&G's net profit fell in the most recent quarter. The data released in January showed that the company’s net profit for the fourth quarter of last year was US$1.69 billion, a sharp drop of 49% from US$3.33 billion in the same period of last year. P&G said that it was mainly due to material costs. Rise, plus a reduction in the value of some businesses.

Another well-known daily chemical brand Unilever was also similarly affected. The company’s financial announcement in the fourth quarter of last year showed that although sales revenue increased by 7.1% year-on-year to 11.562 billion euros, net profit dropped by 20.42% year-on-year to 7.6. Billion euros. Paul Polman, chief executive of Unilever, pointed out that the increase in material costs is the main reason for the sharp decline in net profit. "Although the sales price has been raised and some cost-saving measures have been taken, the rapid increase in costs still causes us some difficulties," said Paul Polman.

Different from the strategy of P&G layoffs, Paul Polman stated: “In the future, Unilever will shift its focus to long-term health business. These businesses will bring us sustainable operating profit and strong cash flow.”

The relevant person of the China Association of Detergent Products Industry told reporters that since the first half of 2011, the turmoil in the geopolitical situation in the Middle East and North Africa has triggered concerns about crude oil supply and pushed up international oil prices. The high level of international oil price volatility also led to a significant increase in the prices of daily chemical raw materials, including petroleum products and oils and fats. “At the end of the year, the prices of individual products have been lowered, but the overall level is still high. Small and medium-sized chemical companies have also been greatly affected."

In response to Procter & Gamble and Unilever's countermeasures, Xu Chunsheng, an industry insider in the daily chemical industry, said, “It is everyone’s optimism that raw material costs will return to decline in 2012.”

However, according to Wu Zhigang, deputy director of the China Cosmetics Marketing Research Center, rising costs are part of the decline in profits, but what is important is that the company's growth rate does not meet expectations and internal adjustments cannot absorb the pressure of rising costs. More importantly, this year, companies do not dare to raise prices because consumer confidence is low in the current economic situation and consumers are more resistant.

Not all day-to-day corporate performance is so bleak. L'Oreal Group's 2011 financial report released on February 15 showed that the company achieved global sales of 20.34 billion euros and profit of 2.44 billion euros, an increase of 5.1% and 8.9% respectively from the previous year; the Estee Lauder Group released its second quarter earnings report on February 3rd. The net sales for the quarter reached 2.74 billion U.S. dollars, an increase of 10% compared with 2.49 billion U.S. dollars in the previous fiscal year, and net profit of 39.67 million U.S. dollars, an increase of 15% from 343.9 million U.S. dollars in the previous fiscal year.

Wu Zhigang said that this is related to L'Oreal and Estee Lauder is a high-end cosmetic products company of cosmetics, raw material costs in the relatively low proportion of products.