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With the upcoming plantation wage talks one thing to look at is how a wage hike hits the bottom line of the indutry.
One misconception that investors have is that ONLY the tea segments get hit and rubber and oil palm may escape because of the low labor intensity.
But this may not be accurate, if you look at the September results of KGAL and NAMU you can see that the because of the wage hike in 2009 the increase in the gratuity provision hit the Rubber and Oil Palm segments as well as Tea.
Page 7 of NAMU's report has the segment breakdown http://www.cse.lk/cmt/upload_report_file/725_1289214492389.pdf
You can see that the gratuity provsion in 2009 for the rubber segment was 42 million compared to 4 million in 2010 (the higher hit in 2009 was clearly due to the wage hike)
Page 6 of KGAL's report has the segment breakdown
http://www.cse.lk/cmt/upload_report_file/711_1289214688358.pdf
You can see that the gratuity provsion in 2009 for the rubber segment was 78 million compared to 12 million in 2010 (the higher hit in 2009 was clearly due to the wage hike)
The high rubber prices helped to off set the higher cost of production in the rubber segment but the point i'm trying to make is that investors should not assume that it is only Tea that gets hit because going by KGAL and NAMU's results bot rubber and oil palm took hits last time there was a wage hike.
One misconception that investors have is that ONLY the tea segments get hit and rubber and oil palm may escape because of the low labor intensity.
But this may not be accurate, if you look at the September results of KGAL and NAMU you can see that the because of the wage hike in 2009 the increase in the gratuity provision hit the Rubber and Oil Palm segments as well as Tea.
Page 7 of NAMU's report has the segment breakdown http://www.cse.lk/cmt/upload_report_file/725_1289214492389.pdf
You can see that the gratuity provsion in 2009 for the rubber segment was 42 million compared to 4 million in 2010 (the higher hit in 2009 was clearly due to the wage hike)
Page 6 of KGAL's report has the segment breakdown
http://www.cse.lk/cmt/upload_report_file/711_1289214688358.pdf
You can see that the gratuity provsion in 2009 for the rubber segment was 78 million compared to 12 million in 2010 (the higher hit in 2009 was clearly due to the wage hike)
The high rubber prices helped to off set the higher cost of production in the rubber segment but the point i'm trying to make is that investors should not assume that it is only Tea that gets hit because going by KGAL and NAMU's results bot rubber and oil palm took hits last time there was a wage hike.
