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MIDDLE EAST WAR COULD HIT HOUSEHOLD PRODUCT MAKER PROFITS - TD COWEN

Household and personal care (HPC) companies face a fresh earnings risk from the Middle East conflict as rising polyethylene and oil-linked costs threaten margins, TD Cowen says.

The brokerage estimates a 3% to 5% hit to next-twelve-month earnings per share for major players including Procter & Gamble PG.N, Colgate-Palmolive CL.N and Clorox CLX.N, driven by higher plastic resin, packaging and logistics costs.

U.S. polyethylene makers have already lifted prices in the range of 10% to 15% as buyers pull orders forward and supply tightens, analyst Robert Moskow writes.

The U.S. is the world’s third‑largest exporter of polyethylene, behind China and Vietnam, according to industry trade data, with Asia‑Pacific serving as its second‑biggest destination.

Plastic resins, including high‑density polyethylene, low‑density polyethylene and polypropylene are widely used in packaging for diapers, toothpaste, detergents and garbage bags.

About 84% of Middle East polyethylene exports to Asia and Europe pass through the Strait of Hormuz, TD Cowen says, citing data from Independent Commodity Intelligence Services. Disruptions there, along with Iran’s role as a major oil and resin supplier to China, are adding to supply concerns.

The brokerage estimates that oil‑related inputs make up 7% to 11% of cost of goods sold for large players.

Given HPC companies’ relatively high exposure to oil‑based raw materials and logistics, "we believe they may have to absorb these costs rather than push through price increases in developed markets," Moskow writes, noting weak consumer demand and limited room to raise prices.

Because retailers and consumers are pushing back against further price hikes, the brokerage expects companies to eat the costs rather than rely on another round of price pass-throughs, particularly in North America and Europe.

(Savyata Mishra)

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