KUALA LUMPUR: Shares of SIME DARBY BHD [] were slightly lower in late afternoon on Tuesday, June 7 as analysts expect the wage hike for 37,000 estate-based workers to cost the conglomerate RM89 million.
At 3.07pm, Sime was down one sen to RM9.22. There were 2.55 million shares done at prices ranging from RM9.21 to RM9.25.
A research house said assuming the RM200 a month pay hike would be for all the 37,000 workers, the financial impact to Sime Darby could be around RM89 million.
'This is estimated to be slightly negative for Sime, as its CPO production cost is one of the highest in the industry at an estimated RM1,388'' a tonne for 2010,' it said.
Base salaries for workers at the estates will be in the range of RM1,050 to RM1,100 a month, which in turn should increase employee morale and help Sime better retain employees in the current tight labour situation.
The financial impact would be minimal, as RM89 million worked out to just 3% of PLANTATION [] earnings before interest and tax in FY2011 and 2% of group net profit in FY2011.
The research house added the RM89 million would probably be less if there are productivity gains. Sime Darby's last pay review was in 2005 when CPO price averaged RM1,400 a tonne.
'The move might put pressure on other plantation companies. However, as in the case of Sime Darby, the financial impact is insignificant in the overall context of higher CPO price. Sime remains our top pick in the Malaysian plantations space - maintain Buy,' it said.
At 3.07pm, Sime was down one sen to RM9.22. There were 2.55 million shares done at prices ranging from RM9.21 to RM9.25.
A research house said assuming the RM200 a month pay hike would be for all the 37,000 workers, the financial impact to Sime Darby could be around RM89 million.
'This is estimated to be slightly negative for Sime, as its CPO production cost is one of the highest in the industry at an estimated RM1,388'' a tonne for 2010,' it said.
Base salaries for workers at the estates will be in the range of RM1,050 to RM1,100 a month, which in turn should increase employee morale and help Sime better retain employees in the current tight labour situation.
The financial impact would be minimal, as RM89 million worked out to just 3% of PLANTATION [] earnings before interest and tax in FY2011 and 2% of group net profit in FY2011.
The research house added the RM89 million would probably be less if there are productivity gains. Sime Darby's last pay review was in 2005 when CPO price averaged RM1,400 a tonne.
'The move might put pressure on other plantation companies. However, as in the case of Sime Darby, the financial impact is insignificant in the overall context of higher CPO price. Sime remains our top pick in the Malaysian plantations space - maintain Buy,' it said.
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