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Big companies manage to pass on soaring costs to cash-strapped consumers

Makers of chocolate bars and coffee to lawnmowers and industrial
robots succeeded in passing on soaring costs to consumers,
first-quarter earnings showed on Thursday, allaying fears higher
prices could dent demand for their products.

Some of Europe’s biggest companies reported first-quarter sales
increases, with KitKat maker Nestle (NESN.S), Evian water owner Danone
(DANO.PA), and Dulux paint maker Akzo Nobel (AKZO.AS) saying they were
able to accomplish the gains while raising their prices.

Engineering company ABB (ABBN.S) and gardening equipment maker
Husqvarna (HUSQb.ST) also reported strong demand despite both
increasing prices.

“Pricing power does exist. Across multiple categories. In European
food, it is called Nestle,” said Bernstein analyst Bruno Monteyne.

Outside Europe, Tesla (TLSA.O) surged past Wall Street expectations on
Wednesday, as higher prices helped insulate the electric vehicle maker
from supply chain chaos and rising costs. [nL3N2WI3AV]

The big U.S. airlines United Airlines Holdings Inc (UAL.O) and
American Airlines Group Inc (AAL.O) reported that high fares have not
dented demand for domestic travel. Both airlines forecast a return to
profitability. read more

“The demand environment is very strong,” American Airlines Chief
Executive Robert Isom said in a statement.

But while cheering investors, with Nestle, ABB, and Akzo Nobel
enjoying share price gains, the strategy is stirring worries about
households’ ability to cope and the outlook for the rest of the year.
read more

Rising interest rates and lagging pay deals are squeezing consumers,
who are seeing their disposable incomes shrink and shopping bills
rise.

There have been some signs in U.S. retail data that consumers have
begun cutting back on discretionary spending amid high inflation and
companies that thrived during the pandemic have lost some of their
edges. read more

On Tuesday, Netflix Inc (NFLX.O) blamed inflation, the war in Ukraine,
and fierce competition on a loss of subscribers for the first time in
more than a decade. read more

And while Nescafe owner Nestle was among the winners on Thursday,
reporting a 7.6% rise in organic sales during the first three months
of the year, its CEO later warned that inflation has made its profit
margin target more challenging. read more

Nestle beat a 5.0% average forecast for the sales measure that strips
out currency swings and M&A deals in a company-compiled consensus
thanks to price increases of 5.2%.

“We stepped up pricing in a responsible manner and saw sustained
consumer demand,” the Swiss company, whose products include Purina pet
food and Nespresso, said.

Still, the world’s biggest food group said the current price rises
were unlikely to be the last.

“Cost inflation continues to increase sharply, which will require
further pricing and mitigating actions over the course of the year,”
Nestle added.

French peer Danone, whose product lineup includes Activia yogurt and
Evian water, said it was also ready for further rounds of price
increases “if needed” after reporting a 7.1% sales increase late on
Wednesday. read more

The world’s biggest yogurt maker benefited from price increases at the
start of the year as well as easier comparisons and stronger demand
for baby formula in China.

Higher prices could be a sensitive topic in its French home market
where the cost of living crisis sets the tone for the presidential
runoff between incumbent Emmanuel Macron and his right-wing challenger
Marine Le Pen. read more

Price rises have also not hurt demand for Dutch paint and coatings
maker Akzo Nobel, which beat quarterly core earnings estimates on
Thursday while reporting a 17% increase in prices compared with a year
earlier.

CEO Thierry Vanlancker said that the group’s “vigorous pricing
initiatives” had helped it manage “the unprecedented variable cost
inflation that impacted our industry during the quarter”.

Beyond the consumer area, factory robots and industrial drive maker
ABB (ABBN.S) also reported a 21% jump in orders during its
first-quarter despite increasing prices. read more

CEO Bjorn Rosengren said there was no end in sight to price increases
for components and metals, as well as rising transport costs.

This meant ABB would have to continue to lift prices to deal with it,
he said, although there was no sign of customers holding back from
equipping their factories with new products.

“They are still placing orders, I guess they are accepting it,”
Rosengren told reporters. “We are not the only one lifting prices,
everyone is doing that in the market. That is a new reality.”

Also on Thursday, Husqvarna (HUSQb.ST), the world’s biggest maker of
gardening power equipment, said it was raising prices further this
month in response to rising supply and energy costs and said it had no
indication retailers were holding back.

“They accept the price increases,” Henric Andersson, CEO of the
Swedish group told Reuters after the earnings report.

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