CSM NV, the world's largest bakery products supplier, said a higher than expected surge in raw material costs would lead to lower first-half earnings, even as it stepped up price hikes to compensate.
CSM shares plunged more than 10 percent on the profit warning, hitting their lowest level since February 2010, as investors questioned the company's ability to offset cost inflation while safeguarding its profitability.
"Exactly where the cost/pricing problem — finished goods, ingredient supplies or both — lies is not known, but it may not be easy to persuade customers to pay for historic input cost increases when current prices are falling," Davy analyst John O' Reilly wrote in a note.
Food companies have been trying to pass on rising costs for commodities such as grains, sugar and edible oils, as well as increasing plastics and packaging costs, with mixed success, as price hikes can put their market share at risk.
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