Consumer durables firms take a hit

A falling rupee has spelt further trouble for consumer durables companies already reeling under weak consumer sentiment this festive season.

An eight to nine per cent depreciation of the rupee against the dollar in the last one month means companies have to pay more for components or products they import.

The result?

A cost push, compelling most players to consider increasing prices at a time when they normally don't.

LG, the largest consumer durables company in India, has raised prices of its front-loading washing machines, microwave ovens, flat cathode ray tube TVs and refrigerators by about three per cent.

All these increases were effective from on Monday, said Amitabh Tiwari, national sales head.

Arch-rival Samsung has also effected a 1.5-per cent price hike across direct cool and frost-free refrigerators, semi-automatic and fully-automatic washing machines (both front-loading and top-loading) and microwave ovens.

These revisions, said a company spokesperson, were effective from on Monday.

Videocon, the third-largest consumer durables company, has also increased prices across product categories.

The increases, group president Pradeep Dhoot said, were between one to five per

cent.

Appliances have seen price rises, but companies have been cautious while increasing the mark-up on flat panel TVs, which see a significant amount of imports, from panels to chipsets.

The reason is most are not keen to hurt growth in that segment. In the last two years, flat panel TVs, including LEDs and LCDs, have grown by about 80 per cent per annum.

Most players estimate the flat panel market, which closed the 2010 calendar year at 2.8 million units, will end at 4.5 million units, growth of 60 per cent.

"Though a bit lower than the last two years, it is still good enough," said Tiwari.

Sixty per cent of flat panel sales happen in the second half of the year, especially during the festive period.

LG is likely to take a look at price rises in flat panels after the festive season, while Samsung executives did not indicate whether price hikes in its flat panel models would be effected soon.

The current round of price rises is likely to result in a further moderation in growth targets set by companies.

Thanks to inflation and interest costs, consumer durable players have already lowered their festive growth targets from 40 per cent to 25-30 per cent.

With products getting dearer due to a falling rupee, companies are expecting sales growth to be in the range of 20 per cent during this festive season.