Manish Desai: This situation will not last for long, so we have started reducing our inventory
As per a representation by a printer body, there’s a 25% hike in the cost of input materials. Since January 2018, the cost of US dollar has risen to Rs 68.
In conversation with Manish Desai, director, Mudrika Labels, we find out what print desires under the rising dollar
23 Jun 2018 | By Noel D'Cunha
70-80% of input material in the print process is produced using the imported raw material. How will this affect your business, plus the pricing negotiations with your customers?
In the last three years, the USD rates has surged from Rs 63 to Rs 68, which has pushed the cost of raw material by 10-12%, which in effect is a 7-8% cost rise in the final product.
How will your company absorb this price increase? What is your strategy?
In this competitive market, printers are working on very thin margin and it is very difficult to absorb the above cost. However, we understand that this situation will not last for long and there have started reducing our inventory for the last two-three months.
Price negotiation with key (high-end) customers is not possible because we sign a yearly contract with them. However, we do negotiate marginal price hikes with medium- and small-scale customers.
Will this raw material inflation temper your company’s outlook for the year? What is the percentage you are looking at?
Raw material inflation will not affect our organisation as this year we have increased our capacity by 40% with the same infrastructure so the cost of production has drop down by 2-2.5%. Hence, we will manage to get same profitability this year as well.
From an export point of view, a strong dollar will boost turnover. Your comments?
Dollar inflation will definitely affect the export market as we have two types of export customers. One, is merchandise exporter, who keeps an eye on daily dollar price and they will ask us to reduce the price as dollar price go up. Second is the direct exporter. As we have to compete in the international market, we cannot increase our price which will indirectly affect our profit margin.