Manufacturing companies with complex supply chains often are early-warning vehicles for consumer-inflation surges. If so, let’s hope Glen Dimplex, the Naughton family-owned business that is selling Morphy Richards for up to €200 million, can be a harbinger of better news.
Fergal Leamy, the chief executive of Glen Dimplex, warned in this newspaper in February that inflation was getting out of control and that consumers would soon feel the pinch at the tills. He said that energy costs began to spike for his business a year previously, alongside its shipping costs and the cost of components such as microchips, forcing it to redesign some appliances to strip out some of the chips.
This week, Leamy said “things have changed” since February. He said there were now “early signs that things are settling down in China” and other Asian countries in its supply chain.
“The cost of shipping containers is coming down in price. We are seeing smaller cost increases coming through in Asia. There is still inflation but there are early signs that it is not as aggressive as it has been.”
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Glen Dimplex has operations across Europe, the US, Asia and Australasia – it is among a small coterie of Irish multinationals with a truly global view. It is, therefore, reassuring that the company appears to be relatively sanguine about its future.
Leamy acknowledged that the company faces “a bit of a slowdown” in Britain, no doubt exacerbated be the hitherto-camouflaged impact of hard Brexit. But its operations in Europe and north America were “holding up well”, he said.
The proposed deal to sell off Morphy Richards to Xinbao, a Chinese manufacturer, should free up at least €175 million in cash at Glen Dimplex’s consumer appliances arm to be redeployed to its other divisions, such as heating and ventilation and precision cooling, as Leamy and the Naughtons look to reshape the business.
If inflation does recede – US economist Paul Krugman was another this week who suggested the problem may have already peaked – it will make the restructuring a lot simpler.
