Tuesday, July 15, 2008

High fuel prices lead distributors to change strategy

BUCHAREST, July 14 (Xinhua) -- Due to high fuel prices, Romania's distributors of pharmaceuticals, building materials and other consumer goods have changed their business strategies, the local media reported on Monday.

The acquisition of electrical appliances, transportation fees and the improvement of shipping routes has been treated by dealers as the main factor when devising strategies.

According to the local daily Ziarul Financiar, poor basic facilities make the problem worse as they consume more fuel, bringing more pressure to the cost of goods since fuel budgets have already risen by as much as 15 percent.

In the first five months of 2008, fuel costs soared by 11.29 percent above budgeted levels. The figure at the end of the year could not be estimated for fuel prices and the modifications of vehicles are hard to predict, said Florin Kubinschi, CFO of the biggest consumer goods dealer, Interbrands Distribution.

In the construction material industry, fuel budgets were up by 15 percent on average and could rise further by the end of the year if oil prices continue to rise at the same rate.

"To counter the effects of higher fuel prices, we're trying to raise consumption efficiency by improving shipping routes and upgrading vehicles," said Dedeman officials.

They also said the percentage of fuel costs in overall costs had risen by 20 percent for the first six months of the year, compared with the corresponding period of the previous year.

Furthermore, certain industries, such as pharmaceuticals, which requires greater flexibility and efficiency, are suffering from problems caused by their specific characteristics.

Dealers say the impact is not as serious as that felt on the international market at present, but if the current situation continues, the next year could be more troublesome for both companies and customers.

Since the beginning of the year, fuel prices have risen by more than 20 percent at the pump, after diesel oil became even more expensive than petrol due to its higher consumption.

Transportation is affected the most by the rising fuel prices, followed by industries such as construction, agriculture and energy, according to the analysis.

"All industries with a small added value are hurt because they are unable to raise their productivity to counter the rising fuel costs. Romania is one of the countries affected most due to the lack of new technology and good management," the newspaper said, citing Romania's former Finance Minister Daniel Daianu.

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