The group also reported that it has had “margin slippage on two key projects”, with detailed risk assessments now completed in a bid to quarantine the impacts to the December-half.
Laboratory giant ALS was another company to blame margin erosion on supply chain issues, specifically in its inspections division that does quality control for goods manufacturers.
The group blamed logistics challenges for the unit’s EBIT margin falling from 27.7 per cent to 23.3 per cent. ALS also said wait times to get some equipment from manufacturers had tripled to 90 days.
Could this be related to the global shortage in semiconductor chips?
Dual-listed Kiwi group Plexure said sales of its TASK transaction management platform had been hit by hardware supply shortages that were being seen across the IT sector.
And Connexion, which provides rental and loan car fleet management services, said it had taken a hit to the number of vehicle subscriptions on its platforms as supply chain issues and the global chip shortage hit car sales. Connexion said inventory at US car brands was down as much as 80 per cent on normal levels.
AP Eagers, which runs car dealers across the country, knows this pain well. It said in a trading update it also continued to be affected by supply issues from various car makers, although demand for vehicles remained robust.
Retailer City Chic Collective also said sourcing and supply chain issues remained a concern.
The group diversified its sourcing during the year to reduce its reliance on Chinese suppliers, but labour shortages in Britain through September, October and into November – and additional logistics issues – made it harder to get its UK stores stocked with winter clothes.
The company will continue to hold higher-than-normal levels of inventory until supply chain issues settle.
United Malt is also dealing with supply chain issues in Britain, with higher material and logistics costs also weighing on its expansion in Scotland. It is also seeing a shortage of shipping containers and higher shipping rates in Asia, which are weighing on the rate at which customers are re-ordering.
Agribusiness giant Nufarm, which released its results for the 12 months ended September 30 on Wednesday, grew its margins handily during the year. But increased freight and warehousing costs were the biggest contributor to expense growth, and the company warned that rising raw material costs and global supply chain and logistics costs would continue to pressure margins. It expects to lift prices to protect profitability.
What’s striking is that none of these companies could give much of an indication as to when these problems would be resolved. That creates a clear question for investors: can we quarantine extra supply chain-related costs to 2021, or do they spill into 2022 in a way that earnings forecasts don’t anticipate?
