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Hypermarcas to pass on higher costs, taxes to Brazilian consumers
February 9, 2015 / 5:31 PM / 3 years ago

Hypermarcas to pass on higher costs, taxes to Brazilian consumers

SAO PAULO, Feb 9 (Reuters) - Brazilian consumer goods maker Hypermarcas SA said it would raise prices as much as 8 percent in April and pass on higher taxes on cosmetics to protect its profit margins.

Brazil’s biggest producer of personal products and pharmaceuticals plans an average price increase of 6 percent to 8 percent in its consumer division, Chief Executive Claudio Bergamo told analysts on a Monday conference call.

Hypermarcas also plans to raise pharmaceutical prices 5 percent to 7 percent, which should keep that division’s gross profit margin stable, he added.

Bergamo said demand has been “normal” at the start of 2015 despite signs of eroding consumer confidence, which several indicators show is at its lowest in more than a decade.

Higher taxes, accelerating inflation and the prospect of water and energy rationing have spooked Brazilian families in recent months, leading to a meager Christmas shopping season.

Consumer prices in Brazil rose in January at their fastest pace in nearly 12 years, and economists now expect inflation to surpass 7 percent this year.

A heavier tax load for cosmetics wholesalers, which hits Hypermarcas in May, will be passed along entirely to consumers, Bergamo told analysts.

A selective promotional policy and less debt exposed to currency swings helped Hypermarcas boost profit by 30 percent in the fourth quarter from a year earlier, it said on Friday.

Hypermarcas plans to continue paying down its debt with excess operational cash flow, executives said on the earnings call. They said the company had hedged the dollar at 2.55 reais for 2015, well below a spot rate flirting with 2.80 on Monday.

Hypermarcas shares slipped 1.3 percent in Monday trading. (Writing by Brad Haynes; Editing by Lisa Von Ahn)

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