MANILA, Philippines - The consumer sector is seen to sustain its positive momentum this year albeit at a slow pace due to rising inflation and a weakening peso, according to online brokerage house COL Financial.
COL Financial’s Jed Frederick Pilarca said consumer companies may see growth rates fall as high inflation reigns and the peso continues to depreciate.
“Revenue growth could slow down coming from an election year in 2013. High inflation could also act as a headwind,†Pilarca said.
Unlike last year which saw a 180 basis point expansion in margins of consumer goods companies, growth will be minimal as prices of some commodities are rising, he said.
“While prices of most global commodities should remain subdued in 2014 amid improving supply conditions, the prices of some select commodities are expected to increase,†Pilarca said.
The high cost of raw materials could negatively impact the margins of consumer stocks, he said.
He noted for instance that demand continues to outpace supply of cocoa, which is one of Universal Robina Corp.’s top raw materials.
The price of beef, which accounts for around 10 percent of Jollibee Food Corp’s raw materials, is also forecast to increase as supplies decrease.
For this year, Pilarca expects gross margin to expand by only 40 basis points.
The continued decline of the peso vis-Ã -vis the US dollar is also seen to push up the cost of imported raw materials. The peso closed at 45.30/:$17.9 percent weaker compared to its 2013 average of 42.30/:$1.