Soaring commodity prices increasing business costs and hurting profit margins

Higher commodity prices have been squeezing profit margins at U.S. businesses for some time and this week, consumer products giant Kimberly-Clark said it plans to raise prices for its goods as surging commodity prices have caused the company's projected commodities tab to double.

MarketWatch reports that the Texas-based company missed analysts' expectations with its first quarter earnings, and cut its 2011 full-year earnings range to the lower end of forecasts on soaring commodity prices. The company faces the sensitive task of offsetting higher business costs on consumers without alienating them, which would further erode revenue.

Other businesses that are reeling from climbing commodity prices - like Newell Rubbermaid, Church & Dwight and Arm & Hammer - have suffered declines in share price as investors are leery of their long-term prospects should commodity prices continue increasing - as they are projected to.

Kimberky-Clark posted a 4 percent rise in sales during the first fiscal quarter from 2010, but the increased business costs ate into its margins, with profits falling to $350 million from $384 million the year prior. The company plans to raise prices of Huggies diapers by three to seven percent, and Cottenelle and Scott 100 bathroom tissue by about seven percent.

In a statement, Kimberly-Clark chief executive Tom Falk said consumers should be ready for price increases. "A number of our businesses will be raising selling prices, including most of our North American consumer products businesses," Falk affirmed.