UBS: ASEAN Consumer Sector: Margins at Risk of a 2022 Replay?
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UBS warned that the current Middle East conflict poses a more systemic cost shock to ASEAN consumer industries than the 2022 episode, affecting a broader range of inputs including food, packaging, and household essentials. Disruption to the Strait of Hormuz threatens petroleum-related and food-related inputs, while Asian market inventories cover only weeks of demand, heightening cost-pass-through risk.
Iran accounted for 7% of global urea exports in 2025, and roughly 30 to 40% of global nitrogen fertilizer exports transit through Hormuz. UBS estimates that current energy prices imply fertilizer costs should rise 48% year-on-year, potentially pushing global food prices up approximately 12%. Direct margin pressure stems from logistics and utility costs, with air freight rates surging as much as 70%. Agricultural processors are most exposed, with a 10% increase in freight and energy costs translating to roughly 85 basis points of EBIT margin compression and a 9% net income decline.
Unlike 2022, companies now have narrower pricing power and less policy support. Subsequent price increases in 2024 to 2025 were below 1%, compared with 9% and 4% during 2022 to 2023. Historically, a negative CPI-PPI gap has reliably signaled margin risk. UBS favors selective defensive names across the region, including CP All, Indofood CBP, Vinamilk, Jollibee, and Mr DIY, among others.